Decomposition of the efficiency of the Chinese state-owned commercial banks at the provincial level

Abstract

This study adopts a bank production function approach to the measurement of banking efficiency at the provincial level in the Chinese state-owned commercial banking sector from 1998 to 2003. Applying Data Envelopment Analysis and efficiency decomposition analysis, this paper has revealed a significant level of pure technical input inefficiency and, to a lesser extent, scale inefficiency across the provincial branches of all the banking groups. The study has also uncovered the extent of inefficiency in individual banking inputs and provincial branches. Finally, the provincial-level efficiency is further decomposed into within-banking-group and between-banking-group effects.