X-efficiency versus Rent Seeking in Chinese banks: 1997-2006

Kent Matthews, Jianguang Guo and Xu Zhang

No E2008/26, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This study demarcates cost-inefficiency in Chinese banks into X-inefficiency and rent-seeking-inefficiency. A protected banking market not only encourages weak management and X-inefficiency but also public ownership and state directed lending encourages moral hazard and bureaucratic rent seeking. This paper uses bootstrap non-parametric techniques to estimate measures of X-inefficiency and rent-seeking inefficiency for the 4 state owned banks and 10 joint-stock banks over the period 1997-2006. The paper adjusts for the quality of loans by treating NPLs as a negative output. The paper shows that Chinese banks have reduced cost inefficiency and reduced X-inefficiency at a faster rate than rent-seeking inefficiency.

Keywords: Bank Efficiency; China; X-inefficiency; DEA; Bootstrapping (search for similar items in EconPapers)
JEL-codes: D23 G21 G28 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2008-11
New Economics Papers: this item is included in nep-ban, nep-cna, nep-eff and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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