Effects of Locus of Control on Bank’s Policy—A Case Study of a Chinese State-Owned Bank

Abstract

This paper investigates how Locus of Control (LOC) will impact the bank’s policies through a case study of a Chinese state-owned bank. At the end of 2008, the investigated bank implemented a personal business-preferred policy. We established two Data Envelopment Analysis (DEA) models to test the impacts of LOC on the implementation of the policy. The results show that internal-controlled branches tend to be more sensitive to the bank’s policy. When it is a positive policy, the internal-controlled branches tend to improve more than the external-controlled branches, while the regression of internal branches is also more significant when it is a negative policy. Location and managers’ personalities are identified as the two direct reasons that cause LOC effects. Several suggestions are also provided in this paper to alleviate the negative effects of LOC.