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The Eficiency Effects of Bank Mergers and Acquisitions in a Developing Economy: Evidence from Malaysia

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  • Sufian, F.

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Abstract

This paper utilises the non-parametric frontier approach, Data Envelopment Analysis (DEA), to analyse the technical and scale efficiency of domestic incorporated Malaysian commercial banks during the merger year, pre-and post merger period. We found that Malaysian banks have exhibit a commendable overall efficiency level of 95.9% during 1998-2003 hence suggesting minimal input waste of 4.1%. Our results suggest that the merger programme was successful, particularly for the small and medium size banks, which have benefited the most from the merger and expansion via economies of scale. On the other hand our results suggest that the larger banks should shrink to benefit from scale advantages. Decision-makers hence ought to be more cautious in promoting mergers as a means to enjoying efficiency gains.

Suggested Citation

  • Sufian, F., 2004. "The Eficiency Effects of Bank Mergers and Acquisitions in a Developing Economy: Evidence from Malaysia," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 1(4), pages 53-74.
  • Handle: RePEc:eaa:ijaeqs:v:1:y2004:i:1_21
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    File URL: http://www.usc.es/economet/reviews/ijaeqs143.pdf
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    References listed on IDEAS

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    1. Bauer, Paul W. & Berger, Allen N. & Ferrier, Gary D. & Humphrey, David B., 1998. "Consistency Conditions for Regulatory Analysis of Financial Institutions: A Comparison of Frontier Efficiency Methods," Journal of Economics and Business, Elsevier, vol. 50(2), pages 85-114, March.
    2. Berger, Allen N. & Hunter, William C. & Timme, Stephen G., 1993. "The efficiency of financial institutions: A review and preview of research past, present and future," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 221-249, April.
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    Cited by:

    1. Usman Owolabi Akeem & Fadipe Moses, 2014. "An Empirical Analysis of Allocative Efficiency of Nigerian CommercialBanks: A DEA Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 4(3), pages 465-475.
    2. Rashid Ameer, 2008. "Product market competition, regulation and dividend payout policy of Malaysian banks," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 16(4), pages 318-334, November.
    3. Yang, Shang-Ho & Burdine, Kenneth H. & Hu, Wu-Yueh, 2016. "An Alternative Approach to Estimate the Economic Loss of Porcine Epidemic Diarrhea (PED) via Data Envelopment Analysis: The Case in Taiwan," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235574, Agricultural and Applied Economics Association.
    4. Abbas, Qamar & Hunjra, Ahmed Imran & Azam, Rauf I & Ijaz, Muhammad Shahzad & Zahid, Maliha, 2014. "Financial performance of banks in Pakistan after Merger and Acquisition," MPRA Paper 60790, University Library of Munich, Germany.
    5. Wahidudin, Ahmad Nazri, 2010. "Technical Efficiency of Commercial Banks in Malaysia: An Application of Window Data Envelopment Analysis," MPRA Paper 45136, University Library of Munich, Germany.

    More about this item

    Keywords

    Finance and Banking; Mergers; Efficiency Change; Data Envelopment Analysis; Malaysia;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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