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Performance of Thailand Banks after the 1997 East Asian Financial Crisis

Listed author(s):
  • Mahathanaseth, Itthipong
  • Tauer, Loren W.

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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File URL: http://purl.umn.edu/180174
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Paper provided by Cornell University, Department of Applied Economics and Management in its series Working Papers with number 180174.

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Date of creation: 2014
Handle: RePEc:ags:cudawp:180174
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  9. Chansarn, Supachet, 2005. "The efficiency in Thai financial sector after the financial crisis," MPRA Paper 1776, University Library of Munich, Germany, revised Dec 2006.
  10. Anastasia Koutsomanoli-Filippaki, 2009. "Profit efficiency under a directional technology distance function approach," Managerial Finance, Emerald Group Publishing, vol. 35(3), pages 276-296, February.
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