Cost X-Efficiency in China's Banking Sector

Cass Faculty of Finance Working Paper No. WP-FF-14-2005

24 Pages Posted: 19 May 2006

See all articles by Shelagh Heffernan

Shelagh Heffernan

City University London - Sir John Cass Business School

Maggie Fu

University of Macau - Faculty of Business Administration

Date Written: 2005

Abstract

Employing the stochastic frontier approach, this paper investigates cost X-efficiency in China's banking sector over the period 1985-2002. The objective is to assess whether different ownership types and banking reforms affect X-efficiency. A two-stage regression model is estimated to identify the significant variables influencing X-efficiency. The results show that on average, banks are operating 50-60% below the X-efficiency frontier. The jointstock banks are found to be more X-efficient than the state-owned commercial banks, and it appears that X-efficiency was higher during the first phase of bank reform.

Keywords: Stochastic frontier analysis, cost X-efficiency, bank reforms, joint stock banks

Suggested Citation

Heffernan, Shelagh A. and Fu, Xiaoqing, Cost X-Efficiency in China's Banking Sector (2005). Cass Faculty of Finance Working Paper No. WP-FF-14-2005, Available at SSRN: https://ssrn.com/abstract=903346 or http://dx.doi.org/10.2139/ssrn.903346

Shelagh A. Heffernan (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Xiaoqing Fu

University of Macau - Faculty of Business Administration ( email )

Macau
(853) 397-4747 (Phone)
(853) 838320 (Fax)

HOME PAGE: http://www.umac.mo/fba/staff/maggiefu.html

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