Technical Efficiency Measurement Incorporating Risk Preferences: An Empirical Analysis of Chinese Commercial Banks

N. Zhu, B. Wang, Z. Yu, Yanrui Wu

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

© 2016 Taylor & Francis Group, LLC. By adjusting direction vectors, we are able to measure technical efficiency incorporating risk preference of individual banks using non-parametric and parametric approaches. Furthermore, we explore categories of commercial banks by comparing their risk preferences to the risk preference that optimizes technical efficiency. Three results emerged. First, technical efficiency scores of joint stock and city commercial banks surpassed those of state-owned commercial banks under the optimal risk preference, and technical efficiency generally improved over time. Second, the preference for risk balance was optimal for achieving technical efficiency. Third, a larger proportion of state-owned and joint stock commercial banks fall into the preference for risk neutral category than city commercial banks.
Original languageEnglish
Pages (from-to)610-624
JournalEmerging Markets Finance and Trade
Volume52
Issue number3
DOIs
Publication statusPublished - 2016

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