Risk Management and Managerial Efficiency in Chinese Banks: A Network DEA Framework

No E2010/1, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: Risk Management in Chinese banks has traditionally been the Cinderella of its internal functions. Political stricture and developmental imperative have often overridden standard practice of risk management resulting in large non-performing loan (NPL) ratios. One of the stated aims of opening up the Chinese banks to foreign strategic investment is the development of risk management functions. In recent years NPL ratios have declined through a mixture of recovery, asset management operation and expanded balance sheets. However, the training and practice of risk managers remain second class compared with foreign banks operating in China. This paper evaluates bank performance using a Network DEA approach where an index of risk management practice and an index of risk management organisation are used as intermediate inputs in the production process. The two indices are constructed from a survey of risk managers in domestic banks and foreign banks operating in China. The use of network DEA can aid the manager in identifying the stages of production that need attention.

Keywords: Risk management; risk organisation; managerial efficiency; Network DEA (search for similar items in EconPapers)
JEL-codes: D23 G21 G28 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010-02, Revised 2010-04
New Economics Papers: this item is included in nep-ban, nep-eff, nep-rmg and nep-tra
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Risk management and managerial efficiency in Chinese banks: A network DEA framework (2013)
Working Paper: Risk Management and Managerial Efficiency in Chinese Banks: A Network DEA Framework (2011)
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