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Empirical Research of Commercial Bank’s Total Factor Productivity

Author: ZhengZuo
Tutor: ZhangBing
School: Nanjing Agricultural College
Course: Finance
Keywords: Commercial banks DEA TFP Malmquist Index
CLC: F832.33
Type: Master's thesis
Year: 2012
Downloads: 24
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Abstract

With the full liberalization of China’s financial markets, the competition that commercial banks are facing will be intensified. And the efficiency of a commerical bank is an important indicator of measuring its market competitiveness, reflecting its operating level. This is the empirical study estimating the total factor productivity of the major commercial banks in Jiangsu Province based on2002-2010data. Its significance lies in the use of data envelopment analysis combined with the Malmquist index, estimates the change in value of total factor productivity, analyze trends and its impact factors, provide new development ideas for regional commercial banks to increase their productivity as well as enhance their competitiveness.In this paper, our study based on international research literature focuses the following aspects:1, The total factor productivity of the major commercial banks in Jiangsu Province is measured by an empirical perspective. In this article, the changes in total factor productivity of the overall survey sample are analyzed first. And then the total factor productivity is decomposed into technical efficiency change, technological change, changes in pure technical efficiency, scale efficiency change index, and the for aspects are analyzed respectively. The dynamic changes of the commercial banks are comparative studied from the view of their organizations and their individual perspectives, combining with macroeconomic development status.2, Some of the factors that affect the total factor productivity are analyzed. In the following analysis, the total factor productivity measured before is set as the dependent variable, while the internal and external factors that influencing the operating effectiveness of the commercial banks are set as independent variables. External factors, mainly referring to the macro environment, such as the rate of economic growth, economic development cycle, monetary policy environment, deposit, loan interest rates; internal factors include the market share of commercial bank credit, deposit, loan, the quality of credit assets, and business innovation. Quantitative analysis of factors that may influence total factor productivity of commercial banks in Jiangsu Province is made by building the Panel Data Model. And then the main factors affecting total factor productivity of the commercial bank can be discovered. Finally, specific proposals are put forward according to the above conclusions of the study, to provide a reference for the better development of the commercial banks in other similar areas.The conclusion is:During the inspection period, the level of total factor productivity of the survey samples is showing a rising trend overall.2002-2010, the annual growth of the total factor productivity is13.1%in average, which is basically compatible with the pace of economic development. According to the analysis of the total factor productivity of survey samples, improvement of the growth of total factor productivity of commercial banks should mainly be attributed to technological progress. Total factor productivity of the survey samples is affected by both internal and external factors. The economic development level, as an external factor, decides the development of commercial banks. The deposit reserve ratio adjustment makes no significant effects on the total factor productivity of commercial banks. The level of deposit rate makes negative correlated significant effects on the total factor productivity of commercial banks while the level of loan rate makes positive correlated significant effects. The rising of commercial bank’s loan market share may benefit to the rising of production efficiency, but no significant correlation can be found between them. The bank’s asset allocation capability has significant positive relation with the bank’s total factor productivity. A high loan-to-deposit ratio indicates the bank has a high productive assets ratio. Non-performing loan ratio and productivity is negatively correlated. The reform of commercial banks benefits to the improvement of total factor productivity.The innovations of this thesis may be:there is no research literature of the main financial institutions’s total factor productivity in Jiangsu province till now. Jiangsu province has it’s regional characteristics as a economically developed area in China. In our research, Industrial economy in Jiangsu is combined with the financial development features, which has great practical significances. And the technical efficiency that affects the total factor productivity is also analyzed deeply. The program to optimize the low efficiency of commercial banks is arised from the view of investment. The program makes the research more practically, which never be mentioned in the existing researches of the total factor productivity of commercial bank. Operating data of2002-2010is choosen to compare the total factor productivity before and after the financial crisis. And the productivities before and after the reform of state-owned commercial banks are also compared. All these comparison can reflect how the Internal and external environment affects the commercial banks.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial organizations, banks > Commercial banks ( specialized banks )
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