Evaluating the performance of Chinese commercial banks: a comparative analysis of different types of banks

Journal article


Dong, Yizhe, Firth, Michael, Hou, Wenxuan and Yang, Weiwei 2015. Evaluating the performance of Chinese commercial banks: a comparative analysis of different types of banks. European Journal of Operational Research. https://doi.org/10.1016/j.ejor.2015.12.038
AuthorsDong, Yizhe, Firth, Michael, Hou, Wenxuan and Yang, Weiwei
Abstract

This paper examines the cost and profit efficiency of four types of Chinese commercial banks over the period from 2002 to 2013. We find that the cost and profit efficiencies improved across all types of Chinese domestic banks in general and the banks are more profit-efficient than cost efficient. Foreign banks are the most cost efficient but the least profit efficient. The profit efficiency gap between foreign banks and domestic banks has widened after the World Trade Organization transition period (2007–2013). Ownership structure, market competition, bank size, and listing status are the main determinants of the efficiency of Chinese banks. We also find a causal relationship between efficiency and SROE by using the panel auto regression method. The evidence from the shadow return on equity (SROE) suggests that policy makers should be cautious of the adjustment costs imposed by the recapitalization process, which offsets the efficiency gains.

KeywordsFinance; Efficiency; Stochastic frontier analysis; Shadow return on equity; Chinese banking
Year2015
JournalEuropean Journal of Operational Research
PublisherElsevier
ISSN03772217
Digital Object Identifier (DOI)https://doi.org/10.1016/j.ejor.2015.12.038
Web address (URL)http://hdl.handle.net/10545/605705
hdl:10545/605705
Publication dates24 Dec 2015
Publication process dates
Deposited18 Apr 2016, 11:38
Accepted18 Dec 2015
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Archived with thanks to European Journal of Operational Research

ContributorsUniversity of Derby
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