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contributes to the literatures about Chinese commercial banks technical
efficiency. In order to eliminate the deviation of efficiency scores caused by
an undesirable output that is represented by banks’ non-performing loans, the
estimation is based on an enhanced parametric hyperbolic distance function
which considers not only desirable outputs but also undesirable outputs.
Furthermore, we extend the model to divide the factors that affecting technical
efficiency into direct factors and indirect factors and exclude the influence
of the latter when analyzing the determiners of banks technical efficiency. The
validity of this model is examined by a panel of bank data from 2004-2010.