Assessing the efficiency of financial supply chain for Chinese commercial banks: a two-stage AR-DEA model

The purpose of this paper is to evaluate Chinese commercial banks efficiency based on different non-performing loans in the process. Moreover, we identified the difference among different types of banks (state-owned commercial banks, joint-stock commercial banks and city commercial banks) and different operation stages (deposit producing sub-stage, profit earning sub-stage and overall stage).

Assurance region (AR) restrictions are combined with a two-stage data envelopment analysis (DEA) model. The efficiency scores of 26 Chinese commercial banks (listed banks) are analyzed by a two-stage AR-DEA model in the study period of 2013–2017.

The results show that state-owned commercial banks had better performance than joint-stock commercial banks and city commercial banks over the five-year study period. The development of Internet finance has positive impact on deposit producing sub-stage and insignificant non-homogeneity existed among the different groups in the circumstances of considering different non-performing loans.

The research findings provide practical insights that help bank managers find the defects in operation process, which need to be improved.

Previous studies viewed non-performing loans as an integrated whole variable. The paper divides non-performing loans into three categories based on the risk and investigates the effect of different types of loans on bank efficiency scores.