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Cost Efficiency of the Hong Kong Banking Sector: A Two-Stage DEA Window Analysis

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  • Robert Alexander
  • Hien Thu Phan
  • Sajid Anwar

Abstract

The paper addresses two questions: (i) how efficient is Hong Kong’s banking sector? and (ii) what are the determinants of banking sector efficiency in Hong Kong? The cost efficiency of the Hong Kong Banking sector over the period 2004 to 2014 is estimated by both traditional DEA and DEA window analysis. The determinants of the efficiency scores are then investigated using a truncated regression model. Data Envelopment Analysis. The efficiency estimates indicate an overall decrease in cost efficiency in the middle of the period, coincident with the Global Financial Crisis and, then, some recovery in efficiency. A second stage regression analysis finds that bank size and GDP growth are positively associated with efficiency, whereas revenue diversification and inflation are associated with lower efficiency. Stock exchange listing status appears to be associated with lower efficiency but no clear relationship between measures of market structure and efficiency is found.

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  • Robert Alexander & Hien Thu Phan & Sajid Anwar, 2016. "Cost Efficiency of the Hong Kong Banking Sector: A Two-Stage DEA Window Analysis," EcoMod2016 9846, EcoMod.
    • Handle: RePEc:ekd:009007:9846
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    Hong Kong; Finance; Optimization models;
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