MBA & MM Theses

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Author: search.filters.author.Chen, ZhanqingSubject: search.filters.subject.Banks and banking

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    A Comparison on the Efficiency of South African and Chinese Banks
    (2012-12-04) Chen, Zhanqing
    Policy makers and regulators have been concerned with the issue of how efficiently banks transform their various inputs into multiple financial products, because efficiency in the banking sector is considered a precondition for macroeconomic stability (Ngalande, 2003). Bank efficiency is the comparison of what is actually produced, with what can be achieved with the same consumption of resources (Farrel, 1957). Berger, Hunter and Timme (1993) reviewed the research on bank efficiency and concluded that econometric approaches are more appropriate in determining bank efficiency. The purpose of this study is to investigate bank profit efficiency and cost efficiency in South Africa and China, and to identify the differences and changes in bank efficiency between the two countries. The study uses an econometric approach to determine bank efficiency in South Africa and China. The econometric model is based on the specification developed by Battese and Coelli (1995). Bank efficiency includes profit efficiency and cost efficiency. Different models have been developed in this research. Both profit efficiency and cost efficiency were found to have remained at the same level over the period for all sampled South African and Chinese banks. Advances to customers and banks, investment securities and total equity were found to be the most significant variables in profit model. Deposits and current accounts owned by customers were among the least significant parameters and not an important factor in determining a bank’s profit efficiency. In the cost- efficiency frontier model, advances to customers and banks, as well as investment securities were the most significant variables, while total equity was least significant. When comparing South African and Chinese banks, no significant difference was identified on either profit or cost efficiency.