Bank Efficiency in China, Rent Seeking versus X-inefficiency: A non-parametric Bootstrapping Approach

Kent Matthews, Jianguang Guo, Nina Zhang and Lina Wang

No E2007/4, 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 11 joint-stock banks over the period 1997-2004. In contrast to other studies of the Chinese banking sector, the paper argues that reduced inefficiency is an indicator that the competitive threat of the opening up of the banking market in 2007 has produced tangible benefits in improved performance. This paper finds evidence of declining trend in both types of 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: 39 pages
Date: 2007-02, Revised 2007-03
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 (3)

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