Determinants of the technical efficiency for Chinese commercial banks during the financial crisis

This paper examines the technical efficiency and its determinants for 17 Chinese commercial banks in the period 2008 to 2010. The aim of this study is to identify the efficiency change of Chinese banks and what variables determine this change when the worldwide financial crisis is still going on. The stochastic frontier approach is used to estimate technical efficiency scores for the 17 commercial banks, and five determinant variables are introduced into the technical inefficiency regression model to detect the most influential factors. Results show that the efficiencies of state-owned and joint-equity banks are growing steadily, and state-owned banks perform the best and city banks perform the worst. Moreover, the assets quality is more important than the innovation ability during this special period to keep the growth of Chinese commercial banks.