Efficiency and risk in commercial banking: empirical evidence from East Asian countries |
| |
| Authors: | Sok Gee Chan Mohd Zaini Abd Karim Bora Aktan |
| |
| Affiliation: | 1. Department of Finance and Banking, Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur 50603, Malaysia;2. Department of Economics, College of Arts and Social Sciences, Universiti Utara Malaysia, 06010 UUM Sintok, Kedah Darul Aman, Malaysia;3. Department of Economics and Finance, College of Business Administration, University of Bahrain, Isa Town, PO Box 32038, Kingdom of Bahrain |
| |
| Abstract: | This paper analyses the effects of off-balance sheet (OBS) activities and various types of risks on the cost and profit efficiencies of banks in seven East Asian countries between 2001 and 2008. Cost and profit efficiency scores are estimated using the data envelopment analysis approach. The results of this analysis are then used to identify the impact of OBS activities and risk exposures on cost and profit efficiencies using a Tobit regression. Bank insolvency risk (as measured by z-scores) is positively related to profit efficiency, while interest sensitivity, size, equity to total assets and OBS exposures all impact on cost efficiency. The analysis of the impact of input and output slacks illustrates that in around 1 in 5 cases banks’ cost efficiency can be improved by adjusting the former variables, whereas in only around 1 in 100 cases a similar outcome is possible for profit efficiency. |
| |
| Keywords: | bank efficiency other depository institutions micro finance institutions mortgages model construction and estimation government policy and regulation |
|
|
