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Consolidation and efficiency: Evidence from non-bank financial institutions in Malaysia

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Author Info
Sufian, Fadzlan
Abdul Majid, Muhamed Zulkhibri

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Abstract

This paper investigates the efficiency changes of finance and merchant banking institutions in Malaysia, during and post-consolidation periods by applying the non-parametric Data Envelopment Analysis (DEA). The evidence suggests that pure technical efficiency is more related to overall efficiency than scale efficiency. On average, 28.7% of finance and merchant banking institutions are operating at CRS, while the majority are scale inefficient. Our results from the Tobit regression analysis further confirmed that the level of equity capital is positively related with the level of efficiency gain. Financial institutions with higher ratio of loans to assets are related to higher level of efficiency. This might reflect the degree of market power exists in the loan markets compared to the other product markets with institutions developed their strategic niche within the market.

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File URL: http://mpra.ub.uni-muenchen.de/12128/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12128.

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Date of creation: 01 Mar 2007
Date of revision: 01 May 2007
Handle: RePEc:pra:mprapa:12128

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Related research
Keywords: Non-Bank Financial Institutions; Data Envelopment Analysis (DEA); Malaysia; Tobit;

Find related papers by JEL classification:
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

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