Efficiency and total factor productivity change of Malaysian commercial banks

Mariani Abd Majid, David S. Saal, Giuliana Battisti

Research output: Contribution to journalArticle

14 Citations (Scopus)

Abstract

This paper analyses the efficiency of Malaysian commercial banks between 1996 and 2002 and finds that while the East Asian financial crisis caused a short-term increase in efficiency in 1998 primarily due to cost-cutting, increases in non-performing loans after the crisis caused a more sustained decline in bank efficiency. It is also found that mergers, fully Islamic banks, and conventional banks operating Islamic banking windows are all associated with lower efficiency. The paper estimates suggest mild decreasing returns to scale, and an average productivity change of 2.37% that is primarily attributable to technical change, which has nonetheless declined over time. Finally, while Islamic banks have been moderately successful in developing new products and technologies, the results suggest that the potential for Islamic banks to overcome their relative inefficiency is limited.

Original languageEnglish
Pages (from-to)2117-2143
Number of pages27
JournalService Industries Journal
Volume31
Issue number13
DOIs
Publication statusPublished - Oct 2011

Fingerprint

Productivity
Islamic financial institutions
Total factor productivity
Commercial banks
Productivity change
Costs
Asian financial crisis
Returns to scale
Islamic banking
Bank efficiency
Mergers
New products
Inefficiency
Technical change
Non-performing loans

Keywords

  • Bank efficiency
  • Bank productivity
  • Islamic banking
  • Malaysian banking

ASJC Scopus subject areas

  • Management of Technology and Innovation
  • Strategy and Management

Cite this

Efficiency and total factor productivity change of Malaysian commercial banks. / Abd Majid, Mariani; Saal, David S.; Battisti, Giuliana.

In: Service Industries Journal, Vol. 31, No. 13, 10.2011, p. 2117-2143.

Research output: Contribution to journalArticle

Abd Majid, Mariani ; Saal, David S. ; Battisti, Giuliana. / Efficiency and total factor productivity change of Malaysian commercial banks. In: Service Industries Journal. 2011 ; Vol. 31, No. 13. pp. 2117-2143.
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