What Causes the Efficiency and the Technology Gap Under Different Ownership Structures in the Chinese Banking Industry?

17 Pages Posted: 25 Feb 2019

See all articles by Chi‐Chuan Lee

Chi‐Chuan Lee

Beijing Normal University (BNU)

Tai-Hsin Huang

National Chengchi University (NCCU)

Date Written: April 2019

Abstract

This paper estimates and compares the cost efficiency of the Chinese banking industry among different ownership types for the period 2003–2014, using the stochastic metafrontier model. We find that foreign banks have the lowest cost frontier, while state‐owned commercial banks undertake the least sophisticated technology. Moreover, the results of the upward trend in the technology gap ratio (TGR) and in metafrontier cost efficiency support that a more open financial market is able to enhance banking efficiency. As for the role of environmental conditions, off‐balance sheet items, non‐performing loans, and financial market structure significantly impact the TGRs of different bank types.

JEL Classification: C51, G21, D24

Suggested Citation

Lee, Chi‐Chuan and Huang, Tai-Hsin, What Causes the Efficiency and the Technology Gap Under Different Ownership Structures in the Chinese Banking Industry? (April 2019). Contemporary Economic Policy, Vol. 37, Issue 2, pp. 332-348, 2019, Available at SSRN: https://ssrn.com/abstract=3339457 or http://dx.doi.org/10.1111/coep.12409

Chi‐Chuan Lee (Contact Author)

Beijing Normal University (BNU) ( email )

19 Xinjiekou Outer St
Haidian District
Beijing, Guangdong 100875
China

Tai-Hsin Huang

National Chengchi University (NCCU) ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei, 11623
Taiwan

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