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Performance of Thailand Banks after the 1997 East Asian Financial Crisis

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  • Mahathanaseth, Itthipong
  • Tauer, Loren W.

Abstract

The performance of commercial banks and government-owned specialized banks in Thailand is estimated after the 1997 East Asian financial crisis. Commercial banks exhibit increasing returns to scale, whereas government-owned specialized banks exhibit decreasing returns to scale, implying further increases in bank size and market concentration in the commercial bank sector but not for government specialized banks. Cost inefficiency varies by bank and is a function of the ratio of nonperforming loans (NPLs) to total loans, equity to total assets and liquid assets to total assets, as well as the number of branches. On average, banks with fewer NPLs, that are well capitalized and with adequate liquidity are efficient. Thus, stricter rules to regulate credit risk management and ensure capital and liquidity adequacy would enhance efficiency in the banking sector. Although estimated input substitutability appears to be low, labour and loanable fund are substitutes. However, labour and physical capital as well as physical and loanable funds are complements in commercial banks. All the three inputs of labour, physical capital and loanable funds are substitutes for the government specialized banks.
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Suggested Citation

  • Mahathanaseth, Itthipong & Tauer, Loren W., 2014. "Performance of Thailand Banks after the 1997 East Asian Financial Crisis," Working Papers 180174, Cornell University, Department of Applied Economics and Management.
  • Handle: RePEc:ags:cudawp:180174
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    Cited by:

    1. Thilakaweera, Bolanda Hewa & Harvie, Charles & Arjomandi, Amir, 2016. "Branch expansion and banking efficiency in Sri Lanka’s post‐conflict era," Journal of Asian Economics, Elsevier, vol. 47(C), pages 45-57.
    2. Gulati, Rachita & Kumar, Sunil, 2016. "Assessing the impact of the global financial crisis on the profit efficiency of Indian banks," Economic Modelling, Elsevier, vol. 58(C), pages 167-181.
    3. Kyle, Steven C., 2014. "Mineral Revenues and Countercyclical Macroeconomic Policy in Kazakhstan," Working Papers 180170, Cornell University, Department of Applied Economics and Management.

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    Keywords

    Financial Economics; Production Economics;

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