Study of efficiency and competitive behaviour of commercial banks in Malaysia

Ismail, Mahadzir 2005. Study of efficiency and competitive behaviour of commercial banks in Malaysia. PhD Thesis, Cardiff University.

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Abstract

This thesis is mainly concerned with the efficiency and competitive behaviour of the commercial banks in Malaysia for the period 1994 - 2000. Firstly, efficiency, either technical or cost, is defined as a relative concept. Technical efficiency is derived from a production frontier function whilst cost efficiency is obtained from a cost frontier function. The measurement of technical efficiency uses two basic DEA models that make two assumptions: constant returns to scale and variable returns to scale. Having obtained the efficiency scores, further investigation is made into identifying the sources of productivity growth. This is done by constructing the Malmquist productivity index. In contrast, the estimation of cost efficiency under the parametric approach is performed by using two methods: the stochastic frontier approach and the fixed effects method. For the purpose of measuring efficiency, this study uses three inputs and three outputs selected based intermediation approach. The competitive behaviour of the banks is determined by employing the Panzar-Rosse methodology. This methodology requires two tests: equilibrium and a competition test. The H-statistic is then obtained that will determine the level of contestability in the market. This study finds that, in general, the average efficiency measures are subject to the estimation technique used. It shows that the DEA technique generates higher efficiency scores than the parametric methods. It is also shown that the scores are positively related to each other. The study also finds that bank ownership plays important role. It suggests that the foreign banks in general are more efficient than the domestic banks. With regard to sources of productivity growth, the main contributor is improvement in technology rather than efficiency improvement. Finally, the study shows that the commercial banks are best described as operating under monopolistic competition.

Item Type:	Thesis (PhD)
Status:	Unpublished
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HG Finance
ISBN:	9781303170423
Date of First Compliant Deposit:	30 March 2016
Last Modified:	22 Aug 2023 13:56
URI:	https://orca.cardiff.ac.uk/id/eprint/55589

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