Bank Reforms, Competition and Efficiency in China's Banking System: Are Small City Bank Entrants More Efficient?

19 Pages Posted: 8 Oct 2009

See all articles by Hui-Lin Lin

Hui-Lin Lin

affiliation not provided to SSRN

Chia-Chi Tsao

affiliation not provided to SSRN

Chih‐Hai Yang

National Central University - Department of Economics

Abstract

This paper analyzes technical efficiency in China's banking system by large banks and small city banks as well as the pre-WTO and post-WTO accession periods. Using an unbalanced panel dataset for 63 banks over 1997–2006 and employing the stochastic frontier function approach, the empirical results reveal that the new entrants, small city banks, experienced a slightly higher efficiency score than incumbent large banks, on average. Compared with the pre-WTO accession period, the efficiency score is found to have improved significantly after entry into the WTO as a result of the competition effect. This competition effect is particularly relevant for small city banks. Finally, determinants of X-inefficiency are examined.

Suggested Citation

Lin, Hui-Lin and Tsao, Chia-Chi and Yang, Chih-Hai, Bank Reforms, Competition and Efficiency in China's Banking System: Are Small City Bank Entrants More Efficient?. China & World Economy, Vol. 17, Issue 5, pp. 69-87, October 2009, Available at SSRN: https://ssrn.com/abstract=1484132 or http://dx.doi.org/10.1111/j.1749-124X.2009.01167.x

Hui-Lin Lin (Contact Author)

affiliation not provided to SSRN

No Address Available

Chia-Chi Tsao

affiliation not provided to SSRN

No Address Available

Chih-Hai Yang

National Central University - Department of Economics ( email )

NO.300 Jung-da Rd.
Jung-li City
Taoyuan, 320,R.O.C
Taiwan

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