Assessing Chinese Commercial Bank Technical Efficiency with a Parametric Hyperbolic Distance Function

Xuan Fang, Feng Yang

School of Management, University of Science and Technology of China, Hefei, China.

DOI: 10.4236/ajor.2014.43012                

Abstract

This paper contributes to the literatures about Chinese commercial banks technical efficiency. In order to eliminate the deviation of efficiency scores caused by an undesirable output that is represented by banks’ non-performing loans, the estimation is based on an enhanced parametric hyperbolic distance function which considers not only desirable outputs but also undesirable outputs. Furthermore, we extend the model to divide the factors that affecting technical efficiency into direct factors and indirect factors and exclude the influence of the latter when analyzing the determiners of banks technical efficiency. The validity of this model is examined by a panel of bank data from 2004-2010.

Keywords

Parametric Distance Functions, Chinese Bank Efficiency, Undesirable Outputs

Conflicts of Interest

The authors declare no conflicts of interest.

References

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