The effects of governance changes on bank efficiency in China: A stochastic distance function approach

Chunxia Jiang, Shujie Yao, Zongyi Zhang

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China has accelerated banking reform since joining the Word Trade Organisation (WTO) in 2001. Employing a stochastic distance function approach, this paper examines bank technical efficiency and differentiates the static, selection and dynamic governance effects on bank efficiency for the 11-year period 1995-2005. The results show that bank efficiency has improved. Joint-stock ownership is associated with better performance in terms of profitability than state ownership (static effect). Strong selection effects are found for both foreign acquisition and going public reform strategies. Foreign acquisition may benefit domestic banks by efficiency gains in the long run, but privatization via initial public offerings (IPOs) appears to have only some short-term effects. © 2009 Elsevier Inc. All rights reserved.
Original languageEnglish
Pages (from-to)717-731
Number of pages15
JournalChina Economic Review
Issue number4
Early online date21 May 2009
Publication statusPublished - Dec 2009



  • Banking
  • China
  • Distance function
  • Efficiency

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