Unveiling endogeneity between competition and efficiency in Chinese banks: a two-stage network DEA and regression analysis

Abstract Although there is a growing number of research articles investigating the performance in banking industry, on Chinese efficiency rather focused discussing rankings to detriment unveiling its productive structure light competition. This issue utmost importance considering relevant transformations economy over last decades. development two-stage network production process (production and intermediation approaches banking, respectively) evaluate level commercial banks. In second stage regression analysis, an integrated Multi-Layer Perceptron/Hidden Markov model used for first time unveil endogeneity among competition, contextual variables, levels banking. The competitive condition industry measured by Panar–Rosse H-statistic Lerner index under Ordinary Least Square regression. Findings reveal that appears be positively impacted competition market power. Second, credit risk analysis older local banks, which focus province level, would possibly fact jeopardizes entire China. Thirdly, it found perfect at reduced power banks are drivers sound system. Finally, our findings suggest concentration few leads increase bank productivity.