CORPORATE GOVERNANCE AND BANK EFFICIENCY EVIDENCE FROM CHINA

Abstract

Compared with the western banking industry, China's banking industry started relatively late. The 2008 financial crisis swept the global financial sector, and although China's banking sector suffered little damage, the crisis highlighted the governance problems of the Chinese banks. Although under the national policy support, the bank development is more stable, the internal management is also more reasonable, how to improve the efficiency of banks through corporate governance is also one of the problems faced by modern commercial banks. This paper uses the annual reports of 14 listed banks for the past 10 years as the data source, and the Data Envelopment Analysis(DEA) model is used to measure the bank efficiency, which is defined by cost and profit efficiency. Finally, through regression analysis, it is found that the board size and the sum of the top four shareholders' shareholding are proportional to the cost efficiency, the board meeting frequency is inversely proportional to the cost efficiency, while there is a U-shaped relationship between executive compensation and cost efficiency, but gender diversity has nothing to do with cost efficiency. Unfortunately, profit efficiency has no significant relationship with all independent variables in this
research. Based on the findings, at the end of the paper, some suggestions are given from three different aspects to improve the efficiency of banks.