Corporate social behaviour: Is it good for efficiency in the Chinese banking industry?

We develop an output-oriented data envelopment analysis framework to examine the efficiency of Chinese banks over the period 2007-2017 and further test the relationship between efficiency and corporate social responsibility (CSR). We are the first piece of research considering the number of employees as one bank input and potential increase in the number of employees as one CSR indicator. Additionally, we innovatively propose another three specific CSR indicators: namely donation, balance of green credits and loans to small and medium sized enterprises. The results show that the gain from improving allocative output-efficiency by reallocating variable inputs is less than the gain attained by improving technical output-efficiency. Evidence from the second-stage regression analysis shows that the overall indirect technical efficiency is significantly and negatively affected by the volumes of green credits, while an increase in the volumes of donations will improve the indirect allocative efficiency.

Automated summary

This study examines the efficiency of Chinese banks using an output-oriented data envelopment analysis framework and explores the relationship between efficiency and corporate social responsibility. The results indicate that improving technical output-efficiency yields greater benefits compared to improving allocative output-efficiency through reallocating variable inputs. Additionally, the study finds that the overall indirect technical efficiency is significantly and negatively affected by the volumes of green credits, while an increase in the volumes of donations improves the indirect allocative efficiency.