scholarly journals Shadow Prices of Non-performing Loans for Chinese Banks in the Post-Crisis Era

2020 ◽  
Author(s):  
Shirong Zhao
Keyword(s):  
Technical Efficiency ◽  
Commercial Banks ◽  
Global Financial Crisis ◽  
Shadow Price ◽  
Foreign Banks ◽  
Shadow Prices ◽  
Lower Efficiency ◽  
Negative Effect ◽  
Chinese Banks ◽  
Directional Output Distance Function

This paper examines how non-performing loans (NPLs) affect Chinese commercial banks before, during, and after the 2008 global financial crisis as well as the subsequent 2008--2010 stimulus. By accounting for NPLs as undesirable outputs, banks' technical efficiency is estimated using directional output distance function. The envelop theorem is applied to calculate the shadow price of NPLs. The shadow price of NPLs is the opportunity cost of reducing NPLs by one Chinese yuan. Empirical results show that the four major state-owned banks are the least technically efficient while foreign banks are the most efficient over the sample period 2007-2014. I also find that the crisis has a negative effect on banks' technical efficiency while the stimulus initially has a positive effect on four major stateowned commercial banks and joint-stock commercial banks, but later shows a negative effect with a higher default ratio and lower efficiency. Finally, the data show that the stimulus has greatly increased the shadow price of NPLs for four major state-owned commercial banks. Starting in 2011, the shadow prices of NPLs for four major state-owned commercial banks are much higher than all other bank types.

Shadow prices of non-performing loans and the global financial crisis

2019 ◽  
Vol 20 (5) ◽  
pp. 411-434
Author(s):  
Ameni Tarchouna ◽  
Bilel Jarraya ◽  
Abdelfettah Bouri
Keyword(s):  
Financial Crisis ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Shadow Price ◽  
Market Price ◽  
Shadow Prices ◽  
Content Type ◽  
Managerial Implications ◽  
Bad Loans ◽  
The Global Financial Crisis

Purpose This paper aims to determine the opportunity cost borne by US commercial banks to reduce non-performing loans (NPLs) by one unit within the global financial crisis framework. Design/methodology/approach To achieve this aim, the authors use the directional output distance function to estimate the technical efficiency while considering NPLs as undesirable output. Then, they estimate the shadow prices of NPLs by using the envelope theorem and solving the revenue function. Findings The results indicate that medium-sized banks are the most efficient, while small banks are the most inefficient ones. Moreover, the shadow prices of NPLs of large banks are higher than those of small and medium-sized banks. This implies a more elevated cost when lessening bad loans in large banks. This is more prominent during the crisis given that the shadow prices of NPLs of large banks have risen sharply over that period. Practical implications Shadow prices have important managerial implications given that they display the amounts of required reduced revenues to lessen NPLs. Accordingly, banks’ managers are called to reduce these loans by paying more attention when choosing their customers. Originality/value With the absence of an observable market price for bad loans in financial literature, the shadow price notion offers an adequate measure to evaluate them. To the best of authors’ knowledge, this is the first study that provides an estimation of the shadow price of NPLs in the US banking sector.

scholarly journals Shadow prices of greenhouse gas emissions: An application to the Czech dairy production

2018 ◽  
Vol 64 (No. 7) ◽  
pp. 291-300 ◽  
Author(s):  
Kroupova Zdeňka Zakova ◽  
Cechura Lukas ◽  
Havlikova Michaela ◽  
Halova Pavlina ◽  
Maly Michal
Keyword(s):  
Greenhouse Gas Emissions ◽  
Greenhouse Gas ◽  
Technical Efficiency ◽  
Shadow Price ◽  
Stochastic Frontier ◽  
Dairy Production ◽  
Shadow Prices ◽  
Undesirable Output ◽  
Gas Emissions ◽  
Production Industry

The paper presents an analysis of the shadow prices of the greenhouse gas emissions in the Czech dairy production industry. There is employed the stochastic frontier multiple output distance function with two market outputs and one non-market (undesirable) output – greenhouse gas emissions – as a representation of a negative public good. The results show that shadow prices differ significantly between producers. Moreover, the price is not stable over time. Significant differences can be seen in shadow prices for the greenhouse gas emissions among the researched group of farmers with respect to the degree of intensification. Most noticeably, the higher the intensification, the higher the shadow price. However, no evidence for a significant relationship between the greenhouse gas prices and technical efficiency was found, and not even the development of the greenhouse gas prices and technical efficiency suggested any common patterns.

China's Banking Reform and Profitability

2010 ◽  
Vol 13 (02) ◽  
pp. 215-236 ◽  
Author(s):  
Erh-Cheng Hwa ◽  
Yang Lei
Keyword(s):  
Financial Crisis ◽  
Financial Performance ◽  
Commercial Banks ◽  
Global Financial Crisis ◽  
Second World War ◽  
World War ◽  
Banking Reform ◽  
Reform Strategy ◽  
Chinese Banks ◽  
Second World

Just as the worse global financial crisis since the Second World War threatens the survival of many global financial giants, the strong financial performance of the Chinese banks stands out. The record profits of Chinese banks are commendable considering that they were considered insolvent not too long ago. The paper reviews the reform strategy of Chinese state commercial banks and its implementation, as well as their strong financial performance in 2007 based upon the four largest listed state commercial banks. Even though a strong economy may have boosted performance, banking reform should have played a significant role in turning around Chinese banks.

scholarly journals A Comparative Analysis of Operational Efficiency between Chinese and Indian Commercial Banks

2018 ◽  
Vol 2 (3) ◽  
pp. 41
Author(s):  
Nan ZHU ◽  
Huajie ZHANG
Keyword(s):  
Comparative Analysis ◽  
Technical Efficiency ◽  
Commercial Banks ◽  
Design Research ◽  
Malmquist Index ◽  
Operational Efficiency ◽  
Efficiency Score ◽  
Foreign Banks ◽  
Financial Industry ◽  
Index Method

Aim:The objective of this paper is to make comparative analysis on operational efficiency between Chinese and Indian commercial banks (CBs). Design / Research methods: Following the previous scholars’ study, two models with different sets of input and output variables have been used to show how efficiency scores vary with change in inputs and outputs. The efficiency scores are measured by using data envelopment analysis (DEA) approach. Conclusions / findings: The mean technical efficiency score of Chinese CBs is always relatively higher than the corresponding score of Indian CBs in 2012-2013, respectively. In terms of technical efficiency and pure technical efficiency, the performance of foreign banks in China is always relatively lower than that of foreign banks in India. Originality / value of the article: While many similar studies have evaluated the performance of banking industries in different countries, very few studies have evaluated the performance of banking sectors between Chinese and Indian economies. The paper would be of interest for OR scholars and practitioners in financial industry. Implications of the research (if applicable): The next step of this study could collect more samples and use Malmquist index method to conduct further study on efficiency, efficiency changing and productivity, in order to conduct further competitive power analysis on both of banking industries of China and India.

Impact of Bank Operational Efficiency Using a Three-Stage DEA Model

2014 ◽  
Vol 3 (4) ◽  
pp. 32-50 ◽  
Author(s):  
Mu-Shun Wang ◽  
Chihuang Lin
Keyword(s):  
Technical Efficiency ◽  
Commercial Banks ◽  
Global Financial Crisis ◽  
Ordinary Least Squares ◽  
Capital Adequacy ◽  
Productivity Index ◽  
Scale Efficiency ◽  
Financial Industry ◽  
Dea Model ◽  
The Impact

In this study the authors use a three-stage sequential technique to develop a Data Envelopment Analysis (DEA) model for examining a bank's technical efficiency index. Internal risk and environmental risk are incorporated into this model to accommodate the well-known BASEL III Accord (required capital adequacy ratio in the financial industry) and to ensure the amount of derivatives turnover ratio is at the level defined by industry best-practices. Information is obtained from 34 Taiwanese commercial banks for the period from 2008 to 2011 following the global financial crisis. The Malmquist total factor productivity index (TFP) is also employed to measure the impact of changes in productivity on the panel data. Empirical results derived from the DEA approach show a gain in technical efficiency and scale efficiency in the industry after adjusting the slack variables when using the corrected ordinary least squares (COLS) regression model. The results indicate that commercial banks need to diversify to increase their market share when dealing with derivatives which are associated with higher risk. The Balk's Malmquisit TFP index shows a decrease in bank productivity and improvement in pure technical efficiency. In this study the authors found that after risk-adjustment there was a distinct inefficient unit decrease and but a marginal unit increase in efficiency.

scholarly journals Problems of increasing the profitability of Russian commercial banks

2020 ◽  
pp. 6-12
Author(s):  
Aleksey Bobryshev ◽  
Svetlana Shamrina ◽  
Aleksandr Frolov
Keyword(s):  
Risk Management ◽  
Commercial Banks ◽  
Management System ◽  
Global Financial Crisis ◽  
Economic Capital ◽  
Foreign Banks ◽  
Risk Management System ◽  
The Global Financial Crisis ◽  
High Level ◽  
Credit Institutions

The article deals with the ways of obtaining income by banks. In modern conditions, taking into account the lessons and consequences of the global financial crisis, the regulator sets increasingly high requirements for the management and capital management system in credit institutions in the financial and banking services markets. In this regard, the number of banks that seek to improve the risk management system in order to bring it in line with the best foreign practices is constantly increasing. However, only a few Russian credit institutions have the necessary sources for calculating economic capital and its adequacy ratios. And only a few (mostly subsidiaries of large foreign banks) are able to make payments in accordance with international best practices. The ability to calculate economic capital, that is, the largest possible loss for a given time horizon, calculated with a set confidence interval, characterizes the high level of quality of the risk management system. The problems of increasing the profitability of commercial banks in the Russian Federation are also disclosed.

scholarly journals An Assessment of Profitability and Efficiency of Commercial Banks in India

2018 ◽  
Vol 7 (2) ◽  
pp. 47-53
Author(s):  
Shradha H. Budhedeo
Keyword(s):  
Public Sector ◽  
Financial Crisis ◽  
Commercial Banks ◽  
Global Economy ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Foreign Banks ◽  
Public Sector Banks ◽  
The Face

Efficiency and stability of the banking sector is a pre-requisite to economic growth of the nation. The banking industry has undergone phenomenal transformation over the past six decades since independence. Banks have shifted from traditional methods of banking to newer modern systems. This has led to impressive growth of commercial banks in India. In the year 2007, financial crisis loomed over the global economy with severe adverse effects on many western economies. In comparison, India stood poised as the fastest growing emerging market economy in the face of turmoil and pessimism. Although India stood strong, many banks started witnessing a change in their growth path during the post global financial crisis period. The public sector banks witnessed major setbacks with decline in their financial performance. In this light, the objective of the study is defined; so as to determine the role of efficiency and profitability indicators on the performance of bank groups. The findings of the study reveal that foreign banks have shown outstanding profitability performance and excellent management efficiency. It is the private sector banks that have outperformed the competing bank groups in terms of earning efficiency. Public sector banks have lagged behind with deteriorating profitability and efficiencies during the analysis period.

scholarly journals The Effects Of Foreign Strategic Investors On Pricing Of Wealth Management Products Of Commercial Banks In China: Does Ownership Structure Matter?

2018 ◽  
Vol 34 (1) ◽  
pp. 193-208
Author(s):  
Hong Zhao ◽  
Xueyan Zhao ◽  
Ning Hou
Keyword(s):  
Ownership Structure ◽  
Commercial Banks ◽  
Foreign Banks ◽  
Rate Of Return ◽  
Difference In Differences ◽  
Single Product ◽  
Wealth Management ◽  
Bank Ownership ◽  
Chinese Banks ◽  
The Impact

Allowing foreign strategic investors (FSIs) to hold minority stake in Chinese banks is very important for China’s banking. Based on data of 221 commercial banks from 2007 to 2015, we use difference in differences (DID) and propensity score matching (PSM) to investigate the effects of shareholding of FSIs on pricing of wealth management products (WMPs) for banks in China from single product view and every bank view. Besides, we further investigate the effects of bank ownership on above relationship. We find that FSIs’ acquisitions significantly enhance the expected rate of return of WMPs on both levels, however decrease the deviation of return of WMPs on single product level but have no evident effects on bank level. Finally, we find that the impact of acquisitions from foreign banks depend on Chinese banks’ ownership structure. Specifically, the effects of FSIs’ acquisitions on pricing of WMPs are positive for state-owned banks (SOBs), while are negative for city commercial banks.

scholarly journals THE OPERATIONAL EFFICIENCY OF CHINA'S TOP TEN COMMERCIAL BANKS

2021 ◽  
Author(s):  
XIONG-HUI ZHANG ◽  
SI-QI YUAN
Keyword(s):  
Human Resources ◽  
Technical Efficiency ◽  
Commercial Banks ◽  
Human Resources Management ◽  
Foreign Banks ◽  
Scale Efficiency ◽  
Resources Management ◽  
Dea Model ◽  
Management Capabilities ◽  
Better Than

Based on DEA model, this paper shows that the performance of China's top ten commercial banks is better than that of foreign banks in China, and that of joint-stock commercial banks is better than that of state-owned commercial banks. China's top ten commercial banks can improve their pure technical efficiency and scale efficiency by strengthening their loan management capabilities, developing diversified business, rationally adjusting their scale and paying attention to human resources management.

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