This study examines the productivity growth of the nationwide banks of China over the ten years to 2006. Using a bootstrap method for the Malmquist index estimates of productivity growth are constructed with appropriate confidence intervals. The paper adjusts for the quality of the output by accounting for the non-performing loans on the balance sheets and test for the robustness of the results by examining alternative sets of outputs. The productivity growth of the state-owned banks is compared with the Joint-stock banks and it determinants evaluated. The paper finds that average productivity of the Chinese banks improved modestly over this period. Adjusting for the quality of loans, by treating NPLs as an undesirable output, the average productivity growth of the state-owned banks was zero or negative while productivity of the Joint-Stock banks was markedly higher. the advantage of being able to decompose productivity growth into technological change, which captures any expansion in the production frontier, from efficiency improvement, which captures the movement towards the efficient frontier. One of the problems associated with this approach is that it is constructed within the framework of Data Envelope Analysis (DEA), which in turn is a non-parametric linear programming method that applies observed input and output data to create a 'best practice' frontier. A further problem with the use of DEA is that it does not account for the quality of the output of a bank, which will depend to some extent on the number non-performing loans on its book. KeywordsThis research has three objectives. First, it aims to measure the productivity of the nationwide operating banks in China. Second, it considers non-performing loans as an undesirable output. Third, it addresses the problem of inference inherent in the use of DEA as a measure of relative performance. The main drawback of the DEA approach is that it assumes the inputs and outputs are measured without error and therefore do not permit statistical evaluation. This paper provides an inferential capability to the point-estimates of productivity through the use of non-parametric bootstrapping methods.This paper is organized on the following lines. The next section outlines the background to the Chinese banking system. Section 3 discusses the methodology and
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.