Bank productivity in China 1997-2007: Measurement and convergence

Kent Matthews, Nina Xu Zhang

Research output: Journal PublicationArticlepeer-review

61 Citations (Scopus)

Abstract

This study examines the productivity growth of the nationwide banks of China and a sample of city commercial, banks for the ten years to 2007. Using a bootstrap method for the Malmquist index, estimates of the total factor productivity growth are constructed. Five different models of inputs and outputs based on variants of the Intermediation and Production approaches and non-performing loans are treated as a bad output, are examined for the purpose of arriving at a robust measure. The productivity growth of the state-owned commercial banks (SOCBs) is compared with the joint-stock banks (JSCBs) and city commercial banks (CCBs). In general, average TFP growth has been neutral over the period for the SOCBs and JSCBs but positive for the CCBs in the second part of the period. Efficiency gains (catch-up) were obtained through cost reduction and technical innovation was associated with greater diversification of revenue away from interest earnings. The opening up of the banking market has not led to a discernible improvement in bank productivity growth.

Original languageEnglish
Pages (from-to)617-628
Number of pages12
JournalChina Economic Review
Volume21
Issue number4
DOIs
Publication statusPublished - Dec 2010
Externally publishedYes

Keywords

  • Bank efficiency
  • Bootstrap
  • China
  • Malmquist
  • Productivity

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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