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Asian Financial Crisis and the Evolution of Korean Banks Efficiency: A DEA Approach

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  • Fadzlan Sufian
  • Muzafar Shah Habibullah

Abstract

In the mid-1990s, the East Asian countries experienced severe financial crisis that were followed by deep economic downturns. A variety of methodologies have been used to understand the nature of the Asian financial crisis. However, the impact of the 1997 Asian financial crisis on the efficiency of the financial industry has yet to be critically examined. By employing the Data Envelopment Analysis (DEA) approach the present study attempts to examine for the first time the impact of the 1997 Asian financial crisis on the efficiency of the Korean banking sector. The study focuses on three major approaches, namely, intermediation, value added, and operating approaches. The results clearly bring forth the high degree of inefficiency in the Korean banking sector, particularly a year after the Asian financial crisis. We find that the Korean banking sector has consistently exhibit higher technical efficiency levels under value added approach, while technical efficiency seems to be lowest under intermediation approach.

Suggested Citation

  • Fadzlan Sufian & Muzafar Shah Habibullah, 2009. "Asian Financial Crisis and the Evolution of Korean Banks Efficiency: A DEA Approach," Global Economic Review, Taylor & Francis Journals, vol. 38(4), pages 335-369.
    • Handle: RePEc:taf:glecrv:v:38:y:2009:i:4:p:335-369
    DOI: 10.1080/12265080903391735
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    Citations

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    Cited by:

    1. Paul W. Wilson & Shirong Zhao, 2023. "Investigating the performance of Chinese banks over 2007–2014," Annals of Operations Research, Springer, vol. 321(1), pages 663-692, February.
    2. Isik, Ihsan & Uygur, Ozge, 2021. "Financial crises, bank efficiency and survival: Theory, literature and emerging market evidence," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 952-987.
    3. Léopold Simar & Paul Wilson, 2011. "Two-stage DEA: caveat emptor," Journal of Productivity Analysis, Springer, vol. 36(2), pages 205-218, October.
    4. Padilla-Hernández, Salvador & Venegas-Martínez, Francisco & Gómez-Monge, Rodrigo (ed.), 2011. "Avances recientes en teoría y práctica económica," Sección de Estudios de Posgrado e Investigación de la Escuela Superios de Economía del Instituto Politécnico Nacional, Escuela Superior de Economía, Instituto Politécnico Nacional, edition 1, volume 2, number 006, July.
    5. Roland Banya & Nicholas Biekpe, 2018. "Banking efficiency and its determinants in selected frontier african markets," Economic Change and Restructuring, Springer, vol. 51(1), pages 69-95, February.
    6. Fadzlan Sufian, 2016. "Financial Crisis, Exchange Rate Regimes, Organizational Forms, and Bank Efficiency: Does Globalization Matter?," Emerging Economy Studies, International Management Institute, vol. 2(1), pages 27-71, May.
    7. Gulati, Rachita & Kumar, Sunil, 2016. "Assessing the impact of the global financial crisis on the profit efficiency of Indian banks," Economic Modelling, Elsevier, vol. 58(C), pages 167-181.
    8. Rodrigo Gómez Monge, 2012. "El sector bancario en México, los depósitos a plazo y las cuentas de ahorro: un análisis de eficiencia durante el periodo de internacionalización a través de la envolvente de datos (dea)," Revista Ciencias Estratégicas, Universidad Pontificia Bolivariana, June.
    9. Mohammad Abdul Matin Chowdhury & Razali Haron, 2021. "The efficiency of Islamic Banks in the Southeast Asia (SEA) Region," Future Business Journal, Springer, vol. 7(1), pages 1-16, December.
    10. Achraf Haddad & Anis El Ammari & Abdelfettah Bouri, 2019. "Comparative Study of Ambiguity Resolution between the Efficiency of Conventional and Islamic Banks in a Stable Financial Context," International Journal of Economics and Financial Issues, Econjournals, vol. 9(5), pages 111-129.
    11. Opoku Mensah, Mary & Agbloyor, Elikplimi Komla & Harvey, Simon Kwadzogah & Fiador, Vera Ogeh, 2017. "Sovereign credit ratings and bank funding cost: Evidence from Africa," Research in International Business and Finance, Elsevier, vol. 42(C), pages 887-899.
    12. Malak Reda, 2013. "The Effect of Mergers and Acquisitions on Bank Efficiency: Evidence from Bank Consolidation in Egypt," Working Papers 770, Economic Research Forum, revised Sep 2013.

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