Loan Quality, Ownership and Efficiency of Indian Banks: A Reappraisal Using Bootstrap Truncated Regression Approach

Posted: 22 Nov 2013

See all articles by Milind Sathye

Milind Sathye

University of Canberra - School of Accounting, Banking and Finance; University of Canberra - School of Business and Government

Date Written: March 20, 2013

Abstract

Many prior studies on Indian banking efficiency have typically regressed non-parametric estimates of production efficiency on environmental variables in a two-stage process.

However, Simar and Wilson (2007) have demonstrated that the studies that use such conventional approaches are invalid due to complicated and unknown serial correlation among estimated efficiency.

Using the data envelopment analysis bootstrap procedure suggested by these authors, for the first time, we analyse the technical efficiency of Indian banks and regress the bootstrap scores on a set of environmental variables using a truncated regression.

Banks that are on efficiency frontier as per conventional analysis are actually away from the frontier when bootstrap scores are used. Contrary to many prior studies, state ownership was found to have significant negative impact on efficiency.

Keywords: Indian Banks, efficiency, bootstrap

JEL Classification: G20

Suggested Citation

Sathye, Milind, Loan Quality, Ownership and Efficiency of Indian Banks: A Reappraisal Using Bootstrap Truncated Regression Approach (March 20, 2013). Available at SSRN: https://ssrn.com/abstract=2357788

Milind Sathye (Contact Author)

University of Canberra - School of Accounting, Banking and Finance ( email )

Canberra, Australian Capital Territory 2601
Australia

University of Canberra - School of Business and Government

Canberra, ACT 2601
Australia

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