Rational Cost Inefficiency in Chinese Banks (Mattews K., Xiao Z., Zhang X.)

Bank Efficiency

Abstract According to a frequently cited finding by Berger et al (1993), X-inefficiency contributes 20% to cost-inefficiency in western banks. Empirical studies of Chinese banks tend to place cost-inefficiency in the region of 50%. Such estimates would suggest that Chinese banks suffer from gross cost inefficiency. Using a non-parametric bootstrapping method, this study decomposes cost-inefficiency in Chinese banks into X-inefficiency and allocative-inefficiency. It argues that allocative inefficiency is the optimal outcome of input resource allocation subject to enforced employment constraints. The resulting analysis suggests that allowing for rational allocative inefficiency; Chinese banks are no better or worse than their western counterparts.
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Libref/ Mattews K., Xiao Z., Zhang X. (2009) “Rational Cost Inefficiency in Chinese Banks”, HKIMR Working Paper № 29/2009, pp. 1-32
© Программирование — Александр Красильников, 2008
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