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Risk-based decompositions of the meta profit efficiency of Taiwanese and Chinese banks
Institution:1. Department of Economics, Soochow University, No. 56, Section 1, Kueiyang Street, Taipei 100, Taiwan ROC;2. Department of International Business, Lunghwa University of Science and Technology, No. 300, Section1, Wanshou Road Guishan District, Taoyuan City 33306, Taiwan ROC;3. Department of Transportation Science, National Taiwan Ocean University, No. 2, Beining Road, Keelung 20224, Taiwan ROC;4. Department of Economics, National Taipei University, No. 151, University Road San Shia District, New Taipei City 23741, Taiwan ROC;1. School of Management, Fujian University of Technology, No. 3, Xueyuan Road, University Town, Minhou, Fuzhou City, Fujian Province, China;2. Department of Industrial Management, National Taiwan University of Science and Technology, No. 43, Section 4, Keelung Road, Taipei 106, Taiwan;1. Faculty of Economics and Business Administration, Ghent University, Ghent, Belgium;2. Technology and Operations Management Area, Vlerick Business School, Ghent, Belgium;3. UCL School of Management, University College London, London, UK;1. Oregon State University, USA;2. Fukuoka University, Japan;3. Oregon State University, USA and CERE, Umea, Sweden;4. School of Economics & Australian Institute for Business and Economics (AIBE) & Centre for Efficiency and Productivity Analysis (CEPA), The University of Queensland, Australia
Abstract:This study measures the profit efficiencies of Taiwanese and Chinese banks with the assumption that both types could operate under the metafrontier. To consider the risk consideration of banks, we include equity capital as a quasi-fixed input and develop the risk-based measures of the meta Nerlovian profit efficiency. We further decompose meta profit efficiency and gap into technology and allocative efficiencies and gaps. We use 34 Taiwanese banks and 70 Chinese banks in 2011 to empirically measure profit efficiency and its decompositions. Empirical results show that the Chinese state-owned banks perform the best in meta profit efficiency, followed by Chinese joint-equity banks and Taiwanese state-owned banks. These three types of banks are performing better than the other types of banks in Taiwan and China. We also find that Taiwanese private banks perform better in profit and technical efficiencies versus Chinese city banks.
Keywords:Metafrontier  Risk  Nerlovian profit measurement  Profit inefficiency and gap  Equity capital
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