Title

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

Document Type

Journal article

Source Publication

European Journal of Operational Research

Publication Date

7-1-2016

Volume

252

Issue

1

First Page

280

Last Page

295

Publisher

Elsevier B.V.

Keywords

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

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.

DOI

10.1016/j.ejor.2015.12.038

Print ISSN

03772217

E-ISSN

18726860

Funding Information

Financially supported by a grant from the HKSAR Government (GRFLU340412). {GRFLU340412}

Publisher Statement

Copyright © 2016 Elsevier B.V. All rights reserved. Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Recommended Citation

Dong, Y., Firth, M., Hou, W., & Yang, W. (2016). Evaluating the performance of Chinese commercial banks: A comparative analysis of different types of banks. European Journal of Operational Research, 252(1), 280-295. doi: 10.1016/j.ejor.2015.12.038

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