Abstract: Rural commercial banks are the main providers of rural finance in China. The reform of the new rural financial policies and interest rate liberalization will inevitably affect their market power, then affect risk-taking and efficiency. Based on the data from 39 rural commercial banks in 2006-2016, this paper calculates market power, cost efficiency and profit efficiency respectively by using the quasi-unrelated regression, stochastic frontier cost function and stochastic frontier profit function and builds a dynamic GMM simultaneous equations to analyze the relationship between risk-taking and efficiency of rural commercial banks. The results show that(1) risk-taking and efficiency are continuous and cyclical. (2)The greater the market power, the less risk-taking, the lower the cost efficiency and the higher the profit efficiency of the rural commercial banks,but the impact of market power on risk is limited. (3) risk-taking and efficiency have mutual influence: the relationship between risk-taking and profit efficiency is positive, while risk-taking has negative effect on cost efficiency. These conclusions suggest that rural commercial banks maximize their scale profits through the expansion of market power, while cost efficiency is reduced and their risk-taking capacity is also weakened. Therefore, the operators of rural commercial banks need to pay special attention to the reasonable matching among scale, cost efficiency and risk-taking capacity.

Key words: risk-taking, efficiency, market power, rural commercial bank