Economic reforms and bank efficiency in developing countries: the case of the Indian banking industry
AbstractUsing the Indian banking industry as a case study, this paper proposes and tests hypotheses regarding the possibility of a relationship between three elements of the Economic Reforms (ERs) - namely, fiscal reforms, financial reforms, and private investment liberalisation - and bank efficiency in developing countries. Bank efficiency is measured using data envelopment analysis (DEA); the relationship between the measured efficiency and various bank-specific characteristics and environmental factors associated with the ERs is examined using the OLS and the GMM estimations. Our results show an improvement in the efficiency of banks, especially that of foreign banks, after the ERs. We find a positive relationship between the level of competition and bank efficiency. However, a negative relationship between the presence of foreign banks and bank efficiency is found, which we attribute to a short-run increase in costs due to the introduction of new banking technology by foreign banks. Furthermore, we find that fiscal deficits negatively influence bank efficiency.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 16 (2006)
Issue (Month): 9 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAFE20
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barbara Casu & Philip Molyneux, 2000.
"A Comparative Study of Efficiency in European Banking,"
Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania
00-17, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Barbara Casu & Philip Molyneux, 2003. "A comparative study of efficiency in European banking," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(17), pages 1865-1876.
- Alchian, Armen A & Demsetz, Harold, 1972.
"Production , Information Costs, and Economic Organization,"
American Economic Review,
American Economic Association, vol. 62(5), pages 777-95, December.
- Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
- Richard Blundell & Steve Bond, 1995.
"Initial conditions and moment restrictions in dynamic panel data models,"
IFS Working Papers, Institute for Fiscal Studies
W95/17, Institute for Fiscal Studies.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 87(1), pages 115-143, August.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Williamson, John, 2000. "What Should the World Bank Think about the Washington Consensus?," World Bank Research Observer, World Bank Group, World Bank Group, vol. 15(2), pages 251-64, August.
- Isik, Ihsan & Kabir Hassan, M., 2003. "Financial deregulation and total factor productivity change: An empirical study of Turkish commercial banks," Journal of Banking & Finance, Elsevier, vol. 27(8), pages 1455-1485, August.
- George Clarke & Robert Cull & Maria Soledad Martinez Peria & Susana M. SÂ·nchez, 2003. "Foreign Bank Entry: Experience, Implications for Developing Economies, and Agenda for Further Research," World Bank Research Observer, World Bank Group, World Bank Group, vol. 18(1), pages 25-59.
- Levine, Ross, 1996.
"Financial development and economic growth : views and agenda,"
Policy Research Working Paper Series
1678, The World Bank.
- Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies, Wiley Blackwell,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Lensink, Robert & Hermes, Niels, 2004. "The short-term effects of foreign bank entry on domestic bank behaviour: Does economic development matter?," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 553-568, March.
- Altunbas, Y. & Gardener, E. P. M. & Molyneux, P. & Moore, B., 2001. "Efficiency in European banking," European Economic Review, Elsevier, vol. 45(10), pages 1931-1955, December.
- Claudia Girardone & Philip Molyneux & Edward Gardener, 2004. "Analysing the determinants of bank efficiency: the case of Italian banks," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(3), pages 215-227.
- Sailesh Tanna & Fotios Pasiouras & Matthias Nnadi, 2011. "The Effect of Board Size and Composition on the Efficiency of UK Banks," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(3), pages 441-462, November.
- Moffat, Boitnmelo & Valadkhani, Abbas & Harvie, Charles, 2008. "Identifying productivity change in Botswanaâ€™s financial institutions: an application of Malmquist productivity indices," Economics Working Papers, School of Economics, University of Wollongong, NSW, Australia wp08-13, School of Economics, University of Wollongong, NSW, Australia.
- Rajagopal & Ananya Rajagopal, 2007. "Emerging Perspectives on Self Service Technologies in Retail Banking," Marketing Working Papers 2007-07-MKT, Tecnológico de Monterrey, Campus Ciudad de México.
- Fadzlan Sufian, 2012. "For which option is credit risk more representative on China banks' total factor productivity: Efficiency change or technological progress?," China Finance Review International, Emerald Group Publishing, vol. 2(2), pages 180-202, April.
- Moffat, Boitnmelo & Valadkhani, Abbas, 2008. "Technical efficiency in Botswanaâ€™s financial institutions: a DEA approach," Economics Working Papers, School of Economics, University of Wollongong, NSW, Australia wp08-14, School of Economics, University of Wollongong, NSW, Australia.
- A.I. Dimitras & K. Kosmidou & A.K. Apostolou, 2010. "Bank efficiency estimation and the change of the accounting standards: evidence from Greece," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 2(1), pages 20-39.
- Hsiang-Hsi Liu & Tser-Yieth Chen & Jia-Wen Chen, 2013. "Incorporating the Credit Ranking Measure to Evaluate the Operating Efficiency of Financial Holding Companies in Taiwan," Asian Economic and Financial Review, Asian Economic and Social Society, Asian Economic and Social Society, vol. 3(10), pages 1386-1404, October.
- Fotios Pasiouras & Aggeliki Liadaki & Constantin Zopounidis, 2008. "Bank efficiency and share performance: evidence from Greece," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 18(14), pages 1121-1130.
- Fadzlan Sufian, 2012. "Determinants of multinational banksâ€™ subsidiary performance: the host and home country effects," Journal of Economic and Administrative Sciences, Emerald Group Publishing, Emerald Group Publishing, vol. 28(2), pages 130-155, August.
- Fethi, Meryem Duygun & Pasiouras, Fotios, 2010. "Assessing bank efficiency and performance with operational research and artificial intelligence techniques: A survey," European Journal of Operational Research, Elsevier, Elsevier, vol. 204(2), pages 189-198, July.
- Saibal Ghosh, 2010.
"How Did State-Owned Banks Respond To Privatization? Evidence From The Indian Experiment,"
Annals of Public and Cooperative Economics,
Wiley Blackwell, vol. 81(3), pages 389-421, 09.
- Ghosh, Saibal, 2010. "How did state-owned banks respond to privatization? Evidence from the Indian experiment," MPRA Paper 24716, University Library of Munich, Germany.
- Varmaz, Armin & Varwig, Andreas & Poddig, Thorsten, 2013. "Centralized resource planning and Yardstick competition," Omega, Elsevier, vol. 41(1), pages 112-118.
- Ariff, Mohamed & Can, Luc, 2008. "Cost and profit efficiency of Chinese banks: A non-parametric analysis," China Economic Review, Elsevier, vol. 19(2), pages 260-273, June.
- M. Kabir Hassan & Benito Sanchez, 2007. "Efficiency Determinants and Dynamic Efficiency Changes in Latin American Banking Industries," NFI Working Papers 2007-WP-32, Indiana State University, Scott College of Business, Networks Financial Institute.
- Rajagopal, 2006. "Technology and Customer Value Dynamics in Banking Industry: Measuring Symbiotic Influence in Growth and Performance," Marketing Working Papers 2006-07-MKT, Tecnológico de Monterrey, Campus Ciudad de México.
- Prodromos D. Chatzoglou & Anastasios D. Diamantidis & Eftichia Vraimaki & Elena Polychrou & Kyriakos Chatzitheodorou, 2010. "Banking productivity: an overview of the Greek banking system," Managerial Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 36(12), pages 1007-1027, December.
- Pasiouras, Fotios, 2008. "Estimating the technical and scale efficiency of Greek commercial banks: The impact of credit risk, off-balance sheet activities, and international operations," Research in International Business and Finance, Elsevier, Elsevier, vol. 22(3), pages 301-318, September.
- Fadzlan Sufian & Muzafar Shah Habibullah, 2010. "Financial Disruptions and the Evolution of Malaysian Banking Sectorâ€™s Efficiency: A Non-Stochastic Frontier Approach," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 166-186.
- Sufian, Fadzlan, 2009. "Determinants of bank efficiency during unstable macroeconomic environment: Empirical evidence from Malaysia," Research in International Business and Finance, Elsevier, Elsevier, vol. 23(1), pages 54-77, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.