Efficiency and Total Factor Productivity Change of Malaysian Commercial Banks

The Service Industries Journal

Posted: 1 Sep 2010 Last revised: 17 Feb 2011

See all articles by Mariani Abdul-Majid

Mariani Abdul-Majid

Universiti Kebangsaan Malaysia - School of Economics, Faculty of Economics and Management

David S. Saal

Aston University - Aston Business School

Giuliana Battisti

Warwick Business School

Date Written: 2010

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.

Keywords: Malaysian banking, bank efficiency, bank productivity, Islamic banking

Suggested Citation

Abdul-Majid, Mariani and Saal, David S. and Battisti, Giuliana, Efficiency and Total Factor Productivity Change of Malaysian Commercial Banks (2010). The Service Industries Journal. Available at SSRN: https://ssrn.com/abstract=1669078

Mariani Abdul-Majid (Contact Author)

Universiti Kebangsaan Malaysia - School of Economics, Faculty of Economics and Management ( email )

UKM Bangi, Selangor 43600
Malaysia
++6 03 8921 5789 (Fax)

David S. Saal

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

Giuliana Battisti

Warwick Business School ( email )

Scarman road
Coventry CV4 7AL
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Abstract Views
453
PlumX Metrics