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Comparative Analysis of Local and Foreign Banks Efficiency: A Case Study of Pakistan

Author

Listed:
  • Kashif Rashid

    (COMSATS Institute of Information Technology, Pakistan)

  • Adeela Rustam

Abstract

Purpose – The core objective of this study is to measure the relative efficiency of domestic and foreign banks operating in Pakistan and secondly to emphasize on the basic factors which badly influence the efficiency of banks. The comparative efficiency of sample banks is estimated through application of Data Envelopment Analysis (DEA). The Banker, Charnes and Cooper (BCC) model was used for the measurement of input oriented efficiency and Charnes, Cooper and Rhodes (CCR) model was used for the estimation of output oriented efficiency. The first stage of findings indicates that foreign banks are more efficient in minimization of inputs compared to local banks. The results at the second stage also show that foreign banks are more efficient than local counterparts in maximization of outputs. Finally, the third stage indicates that under benchmarking, the National Bank of Pakistan (NBP) and Hong Kong Shanghai Banking Corporation (HSBC) remained the best performing and standard of excellence for the other banks.

Suggested Citation

  • Kashif Rashid & Adeela Rustam, 2014. "Comparative Analysis of Local and Foreign Banks Efficiency: A Case Study of Pakistan," Oeconomics of Knowledge, Saphira Publishing House, vol. 6(3), pages 7-52, August.
    • Handle: RePEc:eok:journl:v:6:y:2014:i:3:p:7-52
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    More about this item

    JEL classification:

    • P39 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Other
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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