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Impact of Financial Reforms on Efficiency of State-owned, Private and Foreign Banks in Pakistan

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  • Abid A. Burki

    (LUMS)

  • G.S.K. Niazi
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    Abstract

    This paper uses a unique bank level data from 1991 to 2000 and evaluates how financial reforms affect banking efficiency of domestic and foreign banks in Pakistan. The results suggest that banking efficiency falls during initial reform period when banks adjust to enhanced competition, but increases in more advanced stages of reform. While in general foreign and private banks show superior efficiency and factor productivity than state-owned banks, the relative performance of foreign banks worsens after the consolidation stage of the financial reforms is over. We show the importance of link between bank size, asset quality and bank branches with efficiency indexes, and also note that every 10% increase in share of nonperforming to total loans decreases banking efficiency from 6% to 10%.

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    Bibliographic Info

    Paper provided by East Asian Bureau of Economic Research in its series Finance Working Papers with number 22248.

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    Date of creation: Jan 2006
    Date of revision:
    Handle: RePEc:eab:financ:22248

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    Related research

    Keywords: Bank efficiency; Financial Reforms; frontier analysis;

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    Cited by:
    1. Abid A. Burki & Shabbir Ahmad, 2007. "Corporate Governance Changes in Pakistan’s Banking Sector : Is There a Performance Effect?," Governance Working Papers 22251, East Asian Bureau of Economic Research.

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