ANALYSIS OF THE RELEVANCE OF NONTRADITIONAL ACTIVITIES ITEMS UPON THE EFFICIENCY OF CHINESE BANKS: A NONSTOCHASTIC FRONTIER DEA APPROACH

Studies on the performance of the China banking sector have concentrated on analyzing the impact of ownership since reforms. However, little is known about the impact of change in behavior of the State Owned and Joint Stock Commercial Banks towards non-traditional activities on their performance. The present study employs the non-parametric Data Envelopment Analysis (DEA) method to examine the impact of nontraditional activities on the technical, pure technical, and scale efficiency of the China banking sector during the period 2000-2005. Additionally, a battery of parametric and non-parametric univariate tests are employed to examine the difference in the efficiency levels of the China banking sector under the traditional and alternative DEA models. The empirical findings suggest that the State Owned Commercial Banks’ technical efficiency enhances with the inclusion of non-traditional activities attributed to improvement in scale efficiency, while the Joint Stock Commercial Banks’ technical efficiency is higher attributed to improvement in pure technical efficiency.