Efficiency of the Banking Industry Structure in Korea* |
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Authors: | Dong Jin Shin Brian H S Kim |
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Institution: | 1. Economic Analysis Division, National Assembly Budget Office, 1 Uisadang‐ro (Yeouido‐dong), Yeongdeungpo‐gu, Seoul 150‐010, Korea;2. Department of Agricultural Economics and Rural Development, Program in Regional Information, Seoul National University, 1 Gwanangno, Gwanak‐gu, Seoul 151‐742, Korea |
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Abstract: | This paper analyzes whether the efficiency of the Korean banking industry has improved since the bank restructuring in 1997, and whether a bank with high efficiency has a larger market share. This paper uses an efficient structure hypothesis model to examine the relationship between the banks' efficiencies and their profitability. The data envelopment analysis method is applied to measure the efficiency and profitability of the banking industry in order to minimize possible bias due to the inflow of public funds for the bank consolidation. The two‐step Heckman selection method is used to correct for survivorship bias in the model. The derived result indicates that banks with higher efficiencies tend to record higher profit. Moreover, higher pure technological efficiency and scale efficiency have a positive effect on a bank's market share and concentration. |
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Keywords: | bank efficiency data envelopment analysis Heckman selection two‐step method F33 G15 G21 |
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