IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Deregulation and efficiency: the case of private Korean banks

  • Jonathan Hao
  • William C. Hunter
  • Won Keun Yang
Registered author(s):

    This paper examines the productive efficiency of a sample of private Korean banks over the 1985 to 1995 time period. The goal of the analysis is to identify the key determinants of Korean bank efficiency (inefficiency) following the program of deregulation initiated by the government in the early 1980s and augmented in the early 1990s. Using the stochastic frontier cost function approach, efficiency scores were determined for each bank in the sample. A second stage efficiency regression was then estimated to identify the key determinants of operating efficiency. In general, the results show that banks with higher rates of asset growth, fewer employees per million won of assets, larger amounts of core deposits, and lower expense ratios were more efficient. In addition, banks which branched nationwide were found to be more efficient. The financial deregulation of 1991 was found to have had little or no significant effect on the level of sample bank efficiency.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-99-27.

    in new window

    Date of creation: 1999
    Date of revision:
    Handle: RePEc:fip:fedhwp:wp-99-27
    Contact details of provider: Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834
    Phone: 312/322-5111
    Fax: 312/322-5515
    Web page:

    More information through EDIRC

    Order Information: Web: Email:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. repec:sae:niesru:v:145:y::i:1:p:43-63 is not listed on IDEAS
    2. Gilbert, R Alton, 1984. "Bank Market Structure and Competition: A Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 617-44, November.
    3. Soon Cho, 1994. "Dynamics of Korean Economic Development, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 25.
    4. Berger, Allen N. & Mester, Loretta J., 1997. "Inside the black box: What explains differences in the efficiencies of financial institutions?," Journal of Banking & Finance, Elsevier, vol. 21(7), pages 895-947, July.
    5. Kenneth Spong & Richard J. Sullivan & Robert DeYoung, 1995. "What makes a bank efficient? : a look at financial characteristics and management and ownership structure," Financial Industry Perspectives, Federal Reserve Bank of Kansas City, issue Dec, pages 1-19.
    6. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-44, June.
    7. 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.
    8. DeYoung, Robert, 1997. "Comment on 'Operational efficiency in banking: An international perspective'," Journal of Banking & Finance, Elsevier, vol. 21(10), pages 1325-1329, October.
    9. Allen N. Berger & David B. Humphrey, 1997. "Efficiency of Financial Institutions: International Survey and Directions for Future Research," Center for Financial Institutions Working Papers 97-05, Wharton School Center for Financial Institutions, University of Pennsylvania.
    10. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    11. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
    12. William C. Hunter, 1995. "Internal organization and economic performance: the case of large U.S. commercial banks," Economic Perspectives, Federal Reserve Bank of Chicago, issue Sep, pages 10-20.
    13. Mester, Loretta J., 1996. "A study of bank efficiency taking into account risk-preferences," Journal of Banking & Finance, Elsevier, vol. 20(6), pages 1025-1045, July.
    14. Berger, Allen N. & Hancock, Diana & Humphrey, David B., 1993. "Bank efficiency derived from the profit function," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 317-347, April.
    15. Gilbert, R. Alton & Wilson, Paul W., 1998. "Effects of Deregulation on the Productivity of Korean Banks," Journal of Economics and Business, Elsevier, vol. 50(2), pages 133-155, March.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:fip:fedhwp:wp-99-27. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bernie Flores)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.