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03-09-2016 | Original Paper

Bank efficiency in Malaysia: a use of malmquist meta-frontier analysis

Authors: Md. Abul Kalam Azad, Susila Munisamy, Abdul Kadar Muhammad Masum, Paolo Saona, Peter Wanke

Published in: Eurasian Business Review | Issue 2/2017

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Abstract

This paper uses a two-stage data envelopment analysis to examine bank efficiency in Malaysia. In the first stage, we use meta-frontier technology to address bank heterogeneity-bank nature (Islamic vs. conventional banks) and bank ownership (local vs. foreign banks). Using a data set of 43 Malaysian commercial banks, the application of meta-frontier enables us to compare the existence of inefficiency among Malaysian banks because of their business nature and ownership. In doing so, we empirically demonstrate that using different approaches (i.e., production, profitability, and intermediation) for calculating bank efficiency can give significant contradictory results in efficiency scores. In the second stage, we use Simar and Wilson’s double bootstrap regression to estimate the determinants of efficiency in Malaysian banks. This helps to achieve valid inference even in the presence of unknown serial correlation in the meta-frontier efficiency scores. The results from double bootstrap regression confirm that bank ownership, bank nature and gross domestic product have significant influence on bank efficiency. This study reveals that Islamic banks have outperformed. The frontier results reveal that local Islamic banks have moved towards the group technology and foreign Islamic banks have taken the lead in country frontier technology.

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Appendix
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Metadata
Title
Bank efficiency in Malaysia: a use of malmquist meta-frontier analysis
Authors
Md. Abul Kalam Azad
Susila Munisamy
Abdul Kadar Muhammad Masum
Paolo Saona
Peter Wanke
Publication date
03-09-2016
Publisher
Springer International Publishing
Published in
Eurasian Business Review / Issue 2/2017
Print ISSN: 1309-4297
Electronic ISSN: 2147-4281
DOI
https://doi.org/10.1007/s40821-016-0054-4

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