Efficiency of Commercial Banks in Malaysia
AbstractThis study investigates the change in the productivity of banking industry during the period of 2000 to 2004. The data consists of a panel of 11 commercial banks in Malaysia namely Malayan Banking, Bumiputra-Commerce, Public Bank, RHB Bank, Hong Leong Berhad, EON Bank, Affin Bank, Southern Bank Berhad, Bank Islam Malaysia Berhad (BIMB), Ambank and Bank Muamalat. Productivity is measured by the Malmquist index, using a Data Envelopment Analysis (DEA) technique. The Malmquist productivity measures are decomposed into two components: efficiency change and technical change index. Efficiency change is again decomposed into pure efficiency and scale efficiency. Overall, the results show that Total Factor Productivity (TFP) has slightly increased for the whole industry in which efficiency change is found to be the most important source of productivity growth to Malaysia's banking industry as compared to technical component that contributes a negative change to the overall TFP growth. In this case, the scale efficiency is found to be a more important source of efficiency change than pure efficiency component. This implies that the size does matter in improving bank efficiency. Negative growth of technical efficiency indicates a great potential for the industry to increase productivity through higher utilization of technology as well as technological knowledge dispersion. Continuous training programs to familiarize and improve technical expertise appear to offer better prospects for Malaysia's banking industry to achieve greater TFP growth.
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Bibliographic InfoArticle provided by Penerbit Universiti Sains Malaysia in its journal Asian Academy of Management Journal of Accounting and Finance.
Volume (Year): 2 (2006)
Issue (Month): 2 ()
Data Envelopment Analysis (DEA); Malmquist index; bank efficiency; Islamic commercial banks in Malaysia Journal: Asian Academy of Management Journal of Accounting and Finance;
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- Suraya Ahmad & Abdul Rahim Abdul Rahman, 2012. "The efficiency of Islamic and conventional commercial banks in Malaysia," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, vol. 5(3), pages 241-263, August.
- Ab-Rahim, Rossazana & Kadri, Norlina & Ismail, Farhana, 2013. "Efficiency performance of Malaysian Islamic banks," MPRA Paper 46238, University Library of Munich, Germany.
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