X-efficiency is a non-allocative form of efficiency first introduced by Harvey Leibenstein in 1966. The degree of X-efficiency is measured by the deviation of a firm’s costs of production from the technologically minimum costs of production. X-efficiency theory predicts that firms will produce closer to their cost function when they face pressure to do so. In this paper we review studies of X-efficiency among Chinese banks. These studies include the effect of ownership form, for example, state-owned banks versus privately-owned banks, on costs of production. China’s entrance into the WTO, the effect of a bank issuing an IPO and the effect of bank size are other topics of empirical studies reviewed in this paper. In addition some studies on Hong Kong banks before 1997 are included.
References
[1]
Leibenstein, H. (1966) Allocative Efficiency vs. X-Efficiency. American Economic Review, 56, 392-415.
[2]
Mundell, R. (1962) Review of L. H. Janssen, Free Trade, Protection and Customs Union. American Economic Review, 52, 622.
[3]
Fu, X. and Hefferman, S. (2009) The Effects of Reform on China’s Bank Structure and Performance. Journal of Banking & Finance, 33, 39-52. http://dx.doi.org/10.1016/j.jbankfin.2006.11.023
[4]
Fu, X. and Hefferman, S. (2007) Cost X-Efficiency in China’s Banking Sector. China Economic Review, 18, 35-53.
http://dx.doi.org/10.1016/j.chieco.2006.10.002
[5]
Yao, S, Jiang, C., Feng, G. and Willenbockel, D. (2007) WTO Challenges and Efficiency of Chinese Banks. Applied Economics, 39, 629-643. http://dx.doi.org/10.1080/00036840500447799
[6]
Jiang, C., Yao, S. and Zhang, Z. (2009) The Effects of Governance Changes on Bank Efficiency in China: A Stochastic Distance Function Approach. China Economic Review, 20, 717-731. http://dx.doi.org/10.1016/j.chieco.2009.05.005
[7]
Fu, X. and Hefferman, S. (2009) The Effects of Reform on China’s Bank Structure and Performance. Journal of Banking & Finance, 33, 39-52. http://dx.doi.org/10.1016/j.jbankfin.2006.11.023
[8]
García-Herrero, A., Gavilá, S. and Santabárbara, D. (2009) What Explains the Low Profitability of Chinese Banks? Journal of Banking & Finance, 33, 2080-2092. http://dx.doi.org/10.1016/j.jbankfin.2009.05.005
[9]
Chen, X., Skully, M. and Brown, K (2005) Banking Efficiency in China: Application of DEA to Pre- and Post-Dere- gulation Eras: 1993-2000. China Economic Review, 16, 229-245. http://dx.doi.org/10.1016/j.chieco.2005.02.001
[10]
Matthews, K. and Zhang, N. (2010) Bank Productivity in China 1997-2007: Measurement and Convergence. China Economic Review, 21, 617-628. http://dx.doi.org/10.1016/j.chieco.2010.06.004
[11]
Yao, S., Han, Z. and Feng, G. (2008) Ownership Reform, Foreign Competition and Efficiency of Chinese Commercial Banks: A Non-Parametric Approach. World Economy, 31, 1310-1326.
http://dx.doi.org/10.1111/j.1467-9701.2008.01130.x
[12]
Rezvanian, R., Ariss, R. and Mehdian, S. (2011) Cost Efficiency, Technological Progress and Productivity Growth of Chinese Banking Pre- and Post-WTO Accession. Applied Financial Economics, 21, 437-454.
http://dx.doi.org/10.1080/09603107.2010.532110
[13]
Wu, H., Chen, C. and Lin, H. (2009) Can a Stock Market Listing Help to Improve the Operational Performance. Journal of Economic Policy Reform, 12, 13-28. http://dx.doi.org/10.1080/17487870802677742
[14]
Luo, D. and Yao, S. (2010) World Financial Crises and the Rise of Chinese Commercial Banks: An Efficiency Analysis Using DEA. Applied Financial Economics, 20, 1515-1530.
http://dx.doi.org/10.1080/09603107.2010.508717
[15]
Heffernan, S. and Fu, X. (2010) Determinants of Financial Performance in Chinese Banking. Applied Financial Economics, 20, 1585-1600. http://dx.doi.org/10.1080/09603107.2010.505553
[16]
Fung, M. and Cheng, A. (2010) Convergence of Total Factor Productivity among Banks: Hong Kong’s Experience. Global Finance Journal, 21, 201-210. http://dx.doi.org/10.1016/j.gfj.2010.06.006
[17]
Kwan, S. (2006) The X-Efficiency of Commercial Banks in Hong Kong. Journal of Banking & Finance, 30, 1127- 1147. http://dx.doi.org/10.1016/j.jbankfin.2005.05.016
[18]
Frantz, R. (1997) X-Efficiency: Theory, Evidence, and Applications. 2nd Edition, Kluwer, Norwell.
http://dx.doi.org/10.1007/978-1-4615-6265-8
[19]
Frantz, R. (2007) Empirical Evidence on X-Efficiency, 1967-2004. In: Frantz, R., Ed., Renaissance in Behavioral Economics: Essays in Honor of Harvey Leibenstein, Routledge, New York, 211-227.
[20]
Frantz, R. (2015) X-Efficiency and Regulation. Antitrust Bulletin, in Press.
