Cost Efficiency of Nepalese Commercial Banks
Dinesh Prasad Gajurel
University of Tasmania, School of Economics and Finance; Tribhuvan University - Faculty of Management; Kantipur City College; Nobel College; Financial Research Network (FIRN)
July 12, 2010
Nepalese Management Review, Forthcoming
This study attempts to explain the cost efficiency and its determinant for an unbalanced penal set of 15-25 commercial banks of Nepal for 9 years period (2001-2009) by using semi-parametric methodology. At first stage, efficiency and growth of productivity are estimated by using Data Envelopment Analysis – a non parametric methodology. At second stage, efficiency estimates from DEA are regressed by firm specific attributes (independent variables) to find their determinants. The first stage results indicate that there is considerable level of cost inefficiency which is largely caused by technical inefficiency and there exist comparatively low level of external (particularly regulatory) influences on input mix as indicated by very low level of allocative inefficiency. The growth of productivity is low and even negative mostly resulting from lack of technological progress. The second stage results indicate that State-owned banks are less cost efficient than private banks (domestic and foreign); size has consistently inverse impact on cost efficiency; banks with higher financial capital, larger loan ratio and higher profit tend to be more cost efficient, however banks with higher credit risk tend to be less cost efficient.
Number of Pages in PDF File: 33
Keywords: Banks, Economic Efficiency, Data Envelopment Analysis, Factor Productivity
JEL Classification: G21, C14, D24Accepted Paper Series
Date posted: August 13, 2010
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.375 seconds