The determinants of Bank Cost Inefficiency in ASEAN Banking

Izah Mohd Tahir, and Abdul Mongid, and Sudin Haron, (2012) The determinants of Bank Cost Inefficiency in ASEAN Banking. Jurnal Pengurusan (36). pp. 69-76. ISSN 0127-2713

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This study examines the determinants of cost inefficiency of banks operating in 6 member countries of the Association of Southeast Asian Nations (ASEAN): Indonesia, Malaysia, Singapore, Thailand, the Philippines, and Vietnam. First, we estimate the cost inefficiency using the Stochastic Frontier Analysis. Second, we regress the estimated cost inefficiencies on a set of bank specific variables (size, equity to total asset, loan to total asset, personnel expenses to total expenses) and environmental variables (corruption, economic growth and economic freedom) using a Tobit regression analysis. We use a panel dataset of 625 banks in the ASEAN countries for the period from 2003 to 2008. Our results show that the average cost inefficiency during the period is about 33% of the observed total costs. Banks in Singapore exhibit the lowest cost inefficiency relative to banks in the other ASEAN countries. Our second stage results suggest that bank specific variables and economic growth are important determinants of bank cost inefficiencies in ASEAN banking. The impact of corruption and economic freedom is also evident, but only to a limited extent.

Item Type:Article
Keywords:Bank Cost Infficiency; Stochastic Frontier Analysis (SFA); Tobit Regression; ASEAN Countries; Corruption; Economic Freedom
Journal:Jurnal Pengurusan
ID Code:6380
Deposited By: ms aida -
Deposited On:01 Jul 2013 03:08
Last Modified:01 Jul 2013 03:08

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