Applying Data Envelopment Analysis in Measuring the Efficiency of Chinese Listed Banks in the Context of Macroprudential Framework

Abstract

China is a bank-dominated country; therefore, the sustainability of the Chinese banking industry is important for economic development. In this paper, data envelopment analysis (DEA) was combined with the Malmquist index, and we statically and dynamically analyzed the efficiency of listed banks during the period 2012–2017. The results showed that 12 of the 17 banks improved their technical efficiency. The technical efficiency of three banks remained the same, whilst that of two banks had dropped slightly by less than 1.0%. The Chinese government has learned from the lessons of past financial crises to find a way to forestall financial crisis, and implemented macroprudential policy, therefore the banking industry has actively served the real economy and promoted economic development while paying attention to the prevention of financial risks. According to the report of The Banker in 2018, for the first time, the four biggest banks in China topped the list of the Top 1000 World Banks. The research showed that, the Chinese government applied macroprudential framework in the banking supervision, and the listed banks effectively resisted financial risks and realized steady growth. We believe that the macroprudential framework plays a positive role in the economic development and financial stability in China.

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A Simultaneous Stochastic Frontier Model with Dependent Error Components and Dependent Composite Errors: An Application to Chinese Banking Industry

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“…Generate values for variables x 1 and y 1 , and x 2 and y 2 . The explained variables x 1 and x 2 were simulated as uniform random numbers on the interval [0, 1], while the dependent variables y 1 and y 2 were calculated according to Equations (30) and (31), respectively.…”