Financial crisis and the rise of China's state-owned banking sector: a DEA and SFA analysis

Luo, Dan

Abstract

The US credit crunch had generated substantial turmoil over the global financial market and directly caused the collapse of several world banking giants. Nonetheless, Chinese commercial banks decoupled from the rest of the world and achieved remarkable results due to their risk-averse nature and banking reform during the past 10 years. To improve corporate governance and efficiency, the latest reform was focused on ownership transformation via foreign participation and stock listing. Employing data of 14 listed Chinese banks during the period 1999 to 2008, this paper tested whether IPO was an effective way to enhance banks’ efficiency using DEA and SFA. The results confirmed our hypothesis and suggested that restructuring the banks into shareholding companies could improve both pure technical efficiency and scale economies of the banks. This conclusion is further confirmed by the technical inefficiency effects model which found that efficiency rating of listed banks was about 5% higher than their prior IPO level. Facing tougher economic condition and increased competition, banks not only need to broaden income sources, cut expenditures, but more importantly, to strengthen their risk management ability to become more resistant to volatile business environment.

• Presentation Conference Type: Conference Paper (unpublished)
• Conference Name: The 2nd GEP Conference
• Start Date: Nov 1, 2009
• End Date: Nov 1, 2009
• Peer Reviewed: Not Peer Reviewed
• Keywords: finance, crisis, China, banking, state-owned, DEA, SFA
• Public URL: https://uwe-repository.worktribe.com/output/986529
• Publisher URL: http://www.nottingham.ac.uk/gep/news-events/conferences/2009/china-conf-2009.aspx