Productive efficiency of banks in ASEAN countries

  • Received February 1, 2017;
    Accepted March 12, 2017;
    Published June 27, 2017
  • Author(s)
    Suhartono Suhartono
  • DOI
    http://dx.doi.org/10.21511/bbs.12(2).2017.09
  • Article Info
    Volume 12 2017, Issue #2, pp. 91-99
  • TO CITE АНОТАЦІЯ
  • Cited by
    1 articles
  • 1104 Views
  • 327 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

This study examines the determinants of productive efficiency of banks operating in 8 member countries of the Association of Southeast Asian Nations (ASEAN). This study uses the economic theory approach to examine the existence of economies of scale on the ASEAN banking market, especially its impact on cost efficiency. The author applies a concept of average cost (AC) as a proxy for the productive efficiency. He finds that economies of scale exist on the banking market and economies of scale and scope should be considered in the industrial policy. Stronger capital position is also positive to banks’ efficiency and means that stronger capitalized banks are more efficient. Bank that remunerates better tends to be more efficient as a result of economic capital effect.

view full abstract hide full abstract
    • Fig. 1. Profit maximization under neoclassical economics
    • Fig. 2. The varieties of cost of production
    • Fig. 3. Research framework
    • Table 1. Variables and sources of data
    • Table 2. Hypotheses relationship between productive efficiency (TAC) and predictors
    • Table 3. Data description
    • Table 4. Correlation among variables
    • Table 5. Regression result
Related Articles

  • Impact of the COVID-19 pandemic on bank efficiency in Vietnam

    Nguyen Minh SangORCID doi: http://dx.doi.org/10.21511/bbs.17(1).2022.02
    Banks and Bank Systems Volume 17, 2022         Issue #1         pp. 13-23 Views: 1971 Downloads: 1038 TO CITE АНОТАЦІЯ

    Banking system is an important part of the financial system of each country. The operating efficiency in the commercial banking system will provide the tools and financial products more attractive and relevant to the needs of actors in the economy. The purpose of this paper is to analyze the impact of COVID-19 on the efficiency of 26 Vietnamese commercial banks. The paper uses a quantitative method with the nonparametric frontier analysis, data envelopment analysis (DEA) approach, to measure the efficiency of Vietnamese commercial banks. The paper adopts an intermediation approach as the banks are viewed as financial intermediaries providing financial services and payment services to entities in the economy. Research findings reveal that Vietnamese commercial banks have effectively leveraged the positive impacts of the COVID-19 pandemic, since the average efficiency in 2020 improved over the pre-pandemic period in 2019 on the same models for comparison and estimation. Based on such findings, the study makes some suggestions and recommendations to help Vietnamese commercial banks increase their operational efficiency in the context of the prolonged pandemic.

    Acknowledgment
    The author wishes to acknowledge support from the Banking University – Ho Chi Minh City. This research was made possible thanks to all valuable support from relevant stakeholders.

  • Competition, bank fragility, and financial crisis

    Dewi HanggraeniORCID doi: http://dx.doi.org/10.21511/bbs.13(1).2018.03
    Banks and Bank Systems Volume 13, 2018         Issue #1         pp. 22-36 Views: 1675 Downloads: 435 TO CITE АНОТАЦІЯ

    This paper examines how competition affects bank fragility and how this relation varies in normal times and during a financial crisis using the data from Indonesian commercial banking industry. The author finds significant evidence, both statistically and economically, that more competition reduces bank fragility. In particular, the author finds that a decrease in Herfindahl-Hirschman Index (HHI) of deposits by 100 points leads to an increase in bank Z-score by 14.22 percent from its mean. Similarly, a decrease in HHI of loans by 100 points leads to an increase in Z36 by 20.44 percent. This finding is consistent across different kinds of robustness tests, including endogeneity, as well as alternative bank fragility and competition measures. However, this competition-stability nexus holds only in normal times and is reversed during a financial crisis. This suggests that the impact of competition on bank fragility is conditional on the economic condition.

  • Bank-specific vs. macro-economic factors: what drives profitability of commercial banks in Saudi Arabia

    Farkhanda ShamimORCID , Bora AktanORCID , Mohammed Attaitalla Abdulla , Nabeel Mohammed Yaseen Sakhi doi: http://dx.doi.org/10.21511/bbs.13(1).2018.13
    Banks and Bank Systems Volume 13, 2018         Issue #1         pp. 139-149 Views: 1654 Downloads: 248 TO CITE АНОТАЦІЯ

    The goal of this study is to determine the elements that contribute to the profitability of commercial banks in Saudi Arabia. The study is important due to the fact that Saudi vision 2030 foresees Saudi Arabia as a global investment powerhouse and fulfilling this objective requires a profitable banking sector. The method chosen for the study is multiple regression analysis. The sample data is taken for the period ranging 2009 and 2015 for the 12 local banks. The research concludes that bank’s internal factors specifically, bank size, liquidity, credit risk and operational efficiency are significantly determining the profitability in the banks as compared to the economy’s macro-economic variables.

Download Preview
Close
Banks and Bank Systems
Banks and Bank Systems