Bank reforms, competition and efficiency in china's banking system: Are small city bank entrants more efficient?

Hui Lin Lin, Chia Chi Tsao, Chih Hai Yang

Research output: Contribution to journalArticlepeer-review

8 Scopus citations

Abstract

This paper analyzes technical efficiency in China's banking system by large banks and small city banks as well as the pre-WTO and post-WTO accession periods. Using an unbalanced panel dataset for 63 banks over 1997-2006 and employing the stochastic frontier function approach, the empirical results reveal that the new entrants, small city banks, experienced a slightly higher efficiency score than incumbent large banks, on average. Compared with the pre-WTO accession period, the efficiency score is found to have improved significantly after entry into the WTO as a result of the competition effect. This competition effect is particularly relevant for small city banks. Finally, determinants of X-inefficiency are examined.

Original languageEnglish
Pages (from-to)69-87
Number of pages19
JournalChina and World Economy
Volume17
Issue number5
DOIs
StatePublished - Oct 2009

Keywords

  • Bank reform
  • Competition
  • Efficiency
  • Small bank

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