Efficiency Analysis of China’s Commercial Banks Ba.pdf

Feb. 2007, Volume 6, No.2 (Serial No.35) China-USA Business Review, ISSN1537-1514, USA Efficiency Analysis of China’s Commercial Banks Based on DEA: Negative Output Investigation DENG Chen-guo, LIU Ting, WU Jie (School of Management, University of Science Technology of China, Hefei 230026, China) Abstract: This paper focuses on the shortcomings of the extensively-used method of DEA in evaluating the efficiency of bank, i.e., the DEA method cannot make further comparisons to the efficient units and it does not take into account the situation of negative input or output value. We use the BCC model in DEA to measure the fourteen Chinese commercial banks’ efficiency in 1999. Since BCC model has the property of transformation invariance, the problem of negative input or output value is thus resolved. We also use the super-efficiency DEA model to rank all the efficient units completely. Key words: commercial banks; DEA; efficiency; super-efficiency 1. Introduction Bank efficiency reflects the comprehensive evaluation of all the input and output projects, including the operating achievements that can be inferred from various kinds of financial reporting and the operating outcome that cannot be taken into account in financial analysis. Bank efficiency is not only the manifestation of a bank’s comprehensive competitive strength, but also, up to now, the most comprehensive evaluation index of achievements. Therefore, the efficiency analysis of China’s commercial banks would benefit the managerial and administrative personnel a lot in that they could have a clear understanding of their status in the national and international banking