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Economies of scale and scope in China's banking sector

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  • Xiaoqing Fu
  • Shelagh Heffernan

Abstract

Employing the stochastic frontier approach and expansion path measures, this article estimates economies of scale and scope in China's banking sector during the period 1985 to 2002. The objective is to assess whether different ownership types and banking reforms affect economies of scale and scope. The traditional nonfrontier approach and the standard measures are also applied for comparison and completeness. The results indicate the presence of constant returns to scale and significant economies of scope for most joint stock banks throughout the period, and for state-owned banks in the later part of period, following a second set of bank reforms. There is evidence that use of the traditional nonfrontier model biases the measures of scale and scope economies.

Suggested Citation

  • Xiaoqing Fu & Shelagh Heffernan, 2008. "Economies of scale and scope in China's banking sector," Applied Financial Economics, Taylor & Francis Journals, vol. 18(5), pages 345-356.
    • Handle: RePEc:taf:apfiec:v:18:y:2008:i:5:p:345-356
    DOI: 10.1080/09603100600843924
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    2. Harimaya, Kozo, 2018. "The effects of consolidation on bank cost savings: Evidence from Japanese regional banks," Japan and the World Economy, Elsevier, vol. 46(C), pages 41-49.
    3. Hsu Sara & Carolina Alba & Simon Melchor, 2016. "China’s structural transformation: reaching potential GDP in the financial services sector," China Finance and Economic Review, De Gruyter, vol. 5(2), pages 37-57, June.
    4. Massimo Filippini & Martin Koller & Urs Trinkner, 2010. "Do opening hours and unobserved heterogeneity affect economies of scale and scope in postal outlets?," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 1007, USI Università della Svizzera italiana.

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