The research on efficiency of commercial banks based on network DEA approach - Empirical evidence from Chinese commercial banks

The paper evaluates technical efficiency, pure technical efficiency and scale efficiency of 13 commercial banks for the period of 2009-2011. DEA model considers deposit as intermediate variable, i.e. both as input and output element, which is better than traditional DEA approach because traditional approach always has difficulty in deciding deposits as input or output when evaluating bank's efficiency. The empirical result shows: (i) Chinese banks are less influenced by financial crisis than other countries. The technical efficiency is at relatively high level and keeps climbing; (ii) 4 state-owned commercial banks have lower technical efficiency than joint-stock banks, but they have no lower pure technical efficiency than joint-stock banks, and actually they perform rather stably; (iii) The technical inefficiency of Chinese banks is more caused by scale inefficiency, which now is becoming the leading reason. On the basis of efficiency ranking of commercial banks and the reasons of low efficiency of commercial banks, we also discussed some policy suggestion on improving the efficiency of Chinese commercial banks. © 2013 Binary Information Press.