Research on Scale Economy and Management Effect of Chinese Banking Industry

Beike Xia

Beijing University of Chemical Technology Beijing, China

Abstract: After introducing management level variable into the cost function of banks, we can set up an empirical model to estimate the scale economy of the banking industry in China. The result shows that the increasing of the bank scale is an important ｓｏｕｒｃｅ for scale diseconomy under certain management level. On the whole, if management level is settled, the banking industry of our country is in the state of diseconomies of scale and the improving of management level will bring the average cost down.

Keywords: Management Level; Scale Economy; Chinese Banking Industry