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Economic reforms and bank efficiency in developing countries: the case of the Indian banking industry

Ataullah, Ali and Le, Hang (2006). Economic reforms and bank efficiency in developing countries: the case of the Indian banking industry. Applied Financial Economics, 16(9) pp. 653–663.

DOI (Digital Object Identifier) Link: https://doi.org/10.1080/09603100500407440
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Abstract

Using the Indian banking industry as a case study, this paper proposes and tests hypotheses regarding the possibility of a relationship between three elements of the Economic Reforms (ERs) – namely, fiscal reforms, financial reforms, and private investment liberalisation – and bank efficiency in developing countries. Bank efficiency is measured using data envelopment analysis (DEA); the relationship between the measured efficiency and various bank-specific characteristics and environmental factors associated with the ERs is examined using the OLS and the GMM estimations. Our results show an improvement in the efficiency of banks, especially that of foreign banks, after the ERs. We find a positive relationship between the level of competition and bank efficiency. However, a negative relationship between the presence of foreign banks and bank efficiency is found, which we attribute to a short-run increase in costs due to the introduction of new banking technology by foreign banks. Furthermore, we find that fiscal deficits negatively influence bank efficiency.

Item Type: Journal Item
ISSN: 0960-3107
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
Item ID: 50868
Depositing User: Ali Ataullah
Date Deposited: 07 Sep 2017 15:50
Last Modified: 07 Dec 2018 10:56
URI: http://oro.open.ac.uk/id/eprint/50868
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