X-efficiency in Australian banking: An empirical investigation |
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| Affiliation: | 1. Department of Economics and Law and Economics, Universidade Católica de Brasília, CEP 70790-160 Brasília, DF, Brazil;2. London Business School, University of London, London, United Kingdom;3. Department of Economics, Universidade de Brasília, FACE, CEP 70910-900, Brasília, DF, Brazil;4. National Institute of Science and Technology for Complex Systems, Universidade de Brasília, FACE, CEP 70910-900, Brasília-DF, Brazil;1. Cass Business School, City University London, EC1Y 8TZ, UKn;2. Department of Economics, University of Reading, Reading RG6 6AA, UKn;3. Essex Business School, University of Essex, Colchester, CO4 3SQ, UKn;4. Centre for Responsible Banking & Finance, School of Management, University of St Andrews, St Andrews, Scotland, KY16 9SS, UK |
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| Abstract: | This paper empirically investigates the x-efficiency (technical and allocative) in Australian banks. A non-parametric method of Data Envelopment Analysis (DEA) has been used to arrive at the efficiency scores. Banks in this sample were found to have low levels of overall efficiency compared with the banks in the European countries and in the US. The results indicate that, as a source of overall inefficiency, the technical component was more important than the allocative component. Thus, the inefficiency in Australian banks can be attributed to wasting of inputs (technical inefficiency) rather than choosing the incorrect input combinations (allocative inefficiency). Domestic banks were found to be more efficient than foreign owned banks. The study has important implications such as guiding the government policy regarding deregulation and mergers. Since the study pinpoints the sources of inefficiency, it would also help banks with strategic planning. |
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