Gauging Cost Efficiency of China’s Listed Banks

Operational efficiency affects a firm’s profitability, which is in turn reflected in current yield, return on assets and return on equity (ROE). In the past, research has used diverse methods to identify the key to improving operational outcomes. Academic studies in accounting and finance usually evaluate a business’s operational efficiency using financial measures, such as current yield, rate of return on assets, and ROE. Although financial measures of operational efficiency are capable of rendering an objective appraisal, they often fail to provide a comprehensive comparison of differences among business units. However, profitability, which indicates a company’s operational outcome during a certain period, is still the center of attention for a company’s stakeholders.