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

Yizhe DONG, Michael FIRTH, Wenxuan HOU, Weiwei YANG

Research output: Journal PublicationsJournal Article (refereed)

28 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)280-295
Number of pages16
JournalEuropean Journal of Operational Research
Volume252
Issue number1
DOIs
Publication statusPublished - 1 Jul 2016

Fingerprint

Comparative Analysis
Profitability
Profit
Costs
Equity
Adjustment Costs
Autoregression
Banks
Comparative analysis
Commercial banks
Profit efficiency
Determinant
Foreign banks
Return on equity

Bibliographical note

We thank the editor and two anonymous reviewers for helpful comments on a previous version of the paper. Firth acknowledges the support of a grant from
the HKSAR Government (GRFLU340412)

Keywords

  • Chinese banking
  • Efficiency
  • Finance
  • Shadow return on equity
  • Stochastic frontier analysis

Cite this

DONG, Yizhe ; FIRTH, Michael ; HOU, Wenxuan ; YANG, Weiwei. / Evaluating the performance of Chinese commercial banks : a comparative analysis of different types of banks. In: European Journal of Operational Research. 2016 ; Vol. 252, No. 1. pp. 280-295.
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Evaluating the performance of Chinese commercial banks : a comparative analysis of different types of banks. / DONG, Yizhe; FIRTH, Michael; HOU, Wenxuan; YANG, Weiwei.

In: European Journal of Operational Research, Vol. 252, No. 1, 01.07.2016, p. 280-295.

Research output: Journal PublicationsJournal Article (refereed)

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