Financial Reforms and Technical Efficiency in Indian Commercial Banking: A Generalized Stochastic Frontier Analysis

Review of Financial Economics (2013), 22: 109 - 117

36 Pages Posted: 14 Jul 2014

See all articles by Aditi Bhattacharyya

Aditi Bhattacharyya

Sam Houston State University - College of Business Administration - Department of Economics and International Business

Sudeshna Pal

Georgia College and State University

Date Written: 2011

Abstract

In this study we estimate technical efficiency of Indian commercial banks from 1989 to 2009, using a multiple-output generalized stochastic production frontier and analyze the effects of financial reforms on estimated efficiency.The generalized method estimates technical efficiency in the presence of multiple outputs, filling a gap in the existing literature. Our results show that Indian commercial banks were operating with 64% efficiency on average during the sample period. The initial phase of reform had a positive impact on while the later phase adversely affected technical efficiency of banks. Public sector banks show higher efficiency levels compared to private and foreign banks.

Keywords: Technical efficiency, Indian banks, Liberalization, Financial development, Stochastic production frontier

JEL Classification: D24, C23, G21, G28

Suggested Citation

Bhattacharyya, Aditi and Pal, Sudeshna, Financial Reforms and Technical Efficiency in Indian Commercial Banking: A Generalized Stochastic Frontier Analysis (2011). Review of Financial Economics (2013), 22: 109 - 117. Available at SSRN: https://ssrn.com/abstract=2465322

Aditi Bhattacharyya (Contact Author)

Sam Houston State University - College of Business Administration - Department of Economics and International Business ( email )

SHSU Box 2118
Huntsville, TX 77341-2118
United States

Sudeshna Pal

Georgia College and State University ( email )

Milledgeville, GA

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