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Cost efficiency, economies of scale, technological progress and productivity in Indonesian banks

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  • Margono, Heru
  • Sharma, Subhash C.
  • Melvin II, Paul D.
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    Abstract

    This study estimates cost efficiency, economies of scale, technological progress, and productivity growth among Indonesian banks from 1993 to 2000. Average cost efficiency for the banking sector over this period was 70%. However, there is a marked difference in cost efficiency before and after the Asian economic crisis. The banking sector cost efficiency was 80% prior to the crisis and 53% after the crisis. Moreover, results indicate that private-owned banks and joint venture/foreign banks were more efficient than public-owned banks. Furthermore, the relationship between cost efficiency and total assets suggests an optimum bank asset size. Cost reductions attributed to technological progress and economies of scale were greater prior to the Asian economic crisis. Larger decreases in total factor productivity are evident in the post-crisis period.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Asian Economics.

    Volume (Year): 21 (2010)
    Issue (Month): 1 (February)
    Pages: 53-65

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    Handle: RePEc:eee:asieco:v:21:y:2010:i:1:p:53-65

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    Web page: http://www.elsevier.com/locate/asieco

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    Keywords: Cost efficiency Technological progress Banking;

    References

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    Cited by:
    1. Muliaman D. Hadad & Maximilian J. B. Hall & Wimboh Santoso & Ricky Satria & Karligash Kenjegalieva & Richard Simper, 2008. "Banking Efficiency and Stock Market Performance: An Analysis of Listed Indonesian Banks," Discussion Paper Series 2008_07, Department of Economics, Loughborough University, revised Aug 2008.
    2. Ipatova, Irina & Peresetsky, Аnatoly, 2013. "Technical efficiency of Russian plastic and rubber production firms," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 32(4), pages 71-92.
    3. Hadad, Muliaman D. & Hall, Maximilian J.B. & Santoso, Wimboh & Simper, Richard, 2013. "Economies of scale and a process for identifying hypothetical merger potential in Indonesian commercial banks," Journal of Asian Economics, Elsevier, vol. 26(C), pages 42-51.

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