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The determinants of efficiency of publicly listed Chinese banks: evidence from two-stage banking models

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  • Fadzlan Sufian

Abstract

The paper attempts to investigate the long-term trend in the efficiency of the Chinese banking sector over the period 1997-2006 by employing the Data Envelopment Analysis (DEA) window analysis method. We find that the small banks have exhibited the lowest mean technical efficiency compared to their medium and large bank peers, while the medium-sized banks were relatively more technically efficient compared to their small and large bank counterparts. The empirical findings suggest that the Joint Stock Commercial Banks (JSCBs) have been relatively more technically efficient compared to their State-Owned Commercial Bank (SOCB) counterparts attributed to higher mean scale efficiency. On the other hand, the SOCBs have outperformed their JSCB counterparts in terms of pure technical efficiency. The results from the second-stage regression analysis suggest that technical efficiency is positively associated with diversification, loans intensity, capitalization levels, and economic growth. On the other hand, technical efficiency is negatively related to size and expense preference behaviour.

Suggested Citation

  • Fadzlan Sufian, 2009. "The determinants of efficiency of publicly listed Chinese banks: evidence from two-stage banking models," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 2(1), pages 93-133.
    • Handle: RePEc:taf:macfem:v:2:y:2009:i:1:p:93-133
    DOI: 10.1080/17520840902726458
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    References listed on IDEAS

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    1. Richard S. Barr & Thomas F. Siems, 1994. "Predicting bank failure using DEA to quantify management quality," Financial Industry Studies Working Paper 94-1, Federal Reserve Bank of Dallas.
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    1. Proença, Catarina & Augusto, Mário & Murteira, José, 2023. "The effect of earnings management on bank efficiency: Evidence from ECB-supervised banks," Finance Research Letters, Elsevier, vol. 51(C).
    2. Jesús Gustavo Garza-García, 2012. "Determinants of bank efficiency in Mexico: a two-stage analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 19(17), pages 1679-1682.
    3. Huaqing Wu & Jingyu Yang & Wensheng Wu & Ya Chen, 2023. "Interest rate liberalization and bank efficiency: A DEA analysis of Chinese commercial banks," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 31(2), pages 467-498, June.
    4. Andersson, Fredrik N. G. & Burzynska, Katarzyna & Opper, Sonja, 2013. "Lending for Growth? An Analysis of State-Owned Banks in China," Working Papers 2013:19, Lund University, Department of Economics.

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