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Regulatory Reform and Productivity Change in Indian Banking

Author

Listed:
  • Barbara Casu

    (Cass Business School, City University London)

  • Alessandra Ferrari

    (University of Reading)

  • Tianshu Zhao

    (Stirling University)

Abstract

This paper examines the impact of regulatory reform on productivity growth and its components for Indian banks from 1992 to 2009. We estimate parametric and nonparametric efficiency frontiers, followed by Divisia and Malmquist indexes of total factor productivity, respectively. To account for technology heterogeneity among ownership types, we use a metafrontier approach. Results are consistent across methodologies and show sustained productivity growth, driven mainly by technological progress. Furthermore, results indicate that different ownership types react differently to changes in the operating environment. The position of foreign banks becomes increasingly dominant, and their production technology becomes the best practice in the industry. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Barbara Casu & Alessandra Ferrari & Tianshu Zhao, 2013. "Regulatory Reform and Productivity Change in Indian Banking," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 1066-1077, July.
  • Handle: RePEc:tpr:restat:v:95:y:2013:i:3:p:1066-1077
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00298
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    Keywords

    deregulation; productivity change; ownership; DEA; SFA; metafrontier;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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