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Title:Rational cost inefficiency in Chinese banks PDF Logo
Authors:Matthews, Kent
Xiao, Zhiguo
Zhang, Xu
Issue Date:2009
Series/Report no.:Cardiff Economics Working Papers E2009/13
Abstract:According to a frequently cited finding by Berger et al (1993), X-inefficiency contributes 20% to cost-inefficiency in western banks. Empirical studies of Chinese banks tend to place cost-inefficiency in the region of 50%. Such estimates would suggest that Chinese banks suffer from gross cost inefficiency. Using a nonparametric bootstrapping method, this study decomposes cost-inefficiency in Chinese banks into X-inefficiency and allocative-inefficiency. It argues that allocative inefficiency is the optimal outcome of input resource allocation subject to enforced employment constraints. The resulting analysis suggests that allowing for rational allocative inefficiency; Chinese banks are no better or worse than their western counterparts.
Subjects:Bank Efficiency
China
X-inefficiency
DEA
Bootstrapping
JEL:D23
G21
G28
Document Type:Working Paper
Appears in Collections:Cardiff Economics Working Papers, Cardiff Business School, Cardiff University

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