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Has Minority Foreign Investment in China's Banks Improved Their Cost Efficiency?
Author(s) -
Laurenceson James,
Qin Fengming
Publication year - 2008
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/j.1749-124x.2008.00114.x
Subject(s) - china , data envelopment analysis , foreign direct investment , investment (military) , cost efficiency , economics , stochastic game , monetary economics , business , foreign ownership , macroeconomics , microeconomics , mathematical optimization , mathematics , politics , political science , computer science , law , operating system
Since 2001, foreign investors have been permitted to acquire minority ownership stakes in China's banks. This paper assesses whether there is any evidence of a cost efficiency payoff in those banks that have taken on foreign investment. Data envelopment analysis is first used to generate measures of cost efficiency for China's banks over the period 2001—2006. A second stage regression is then performed to determine whether foreign investment has an impact on cost efficiency. The results indicate a positive relationship, although one that is not statistically significant. Policy implications are discussed.