Abstract
The interest rate liberalization (IRL) policy reform in China intends to improve performance of financial institutions. However, the actual effect of the reform is still unclear since China accelerated the reform of interest rate liberalization in 2012. Based on a two-stage network data envelopment analysis (DEA) approach, we evaluate the overall efficiency, fund-raising efficiency and fund-using efficiency of Chinese commercial banks using a data set of 27 commercial banks from 2006 to 2020. Then we further examine the impact of interest rate liberalization on bank efficiency by using Tobit regression. The results show that interest rate liberalization is conductive to the promotion of bank efficiency. However, the positive effect does not appear in the whole production process. It is only reflected in the fund-raising stage. Interest rate liberalization seems to hinder the improvement of fund-using efficiency, which is worth the attention of Chinese commercial banks. Finally, we conclude with several policy implications based on the findings in this paper.
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Notes
Other fundings mainly includes Deposits from Banks, Repos and Cash Collateral, Trading Liabilities and Derivatives.
Securities investment mainly includes Trading Securities and at FV through Income, Derivatives, Available for Sale Securities, Held to Maturity Securities, At-equity Investments in Associates and Other Securities.
RMB deposit rate, RMB loan rate, Foreign currency deposit rate, Foreign currency loan rate, Interbank offered rate, Bill discount rate, Bond issuing rate, Bond repo rate, Coupon trading rate, Bank financial product yield, Monetary fund yield, and Trust product yield.
The annual reports of commercial banks are collected from the internet by the authors, and are available from the corresponding author on reasonable request.
Data sources: www.govindicators.org.
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This research was supported by National Natural Science Foundation of China [grant numbers 71871081, 72188101, 72071067, 71801074], Major Project of the National Social Science Foundation of China [grant number 18ZDA064]. These organizations are not responsible for the views expressed in this paper.
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Conceptualization HW, JY ; Methodology YC, JY; Software YC, JY; Validation YC, JY , WW ; Formal analysis: JY; Investigation JY; Resources JY; Data curation JY; Writing original draft JY; Writing review & editing, HW, YC, WW; Supervision, HW, YC; Project administration, HW, YC; Funding acquisition, HW, YC, WW.
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Wu, H., Yang, J., Wu, W. et al. Interest rate liberalization and bank efficiency: A DEA analysis of Chinese commercial banks. Cent Eur J Oper Res 31, 467–498 (2023). https://doi.org/10.1007/s10100-022-00817-1
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DOI: https://doi.org/10.1007/s10100-022-00817-1