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Financial liberalization and bank efficiency: a comparative analysis of India and Pakistan

Ataullah, Ali; Cockerill, Tony and Le, Hang (2004). Financial liberalization and bank efficiency: a comparative analysis of India and Pakistan. Applied Economics, 36(17) pp. 1915–1924.

DOI (Digital Object Identifier) Link: https://doi.org/10.1080/000368404200068638
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Abstract

This paper provides a comparative analysis of the evolution of the technical efficiency of commercial banks in India and Pakistan during 1988–1998, a period characterized by far-reaching changes in the banking industry brought about by financial liberalization. Data Envelopment Analysis is applied to two alternative input–output specifications to measure technical efficiency, and to decompose technical efficiency into its two components, pure technical efficiency and scale efficiency. The consistency of the estimated efficiency scores are checked by examining their relationship with three traditional non-frontier measures of bank performance. In addition, the relationship between bank size and technical efficiency is examined. It is found that the overall technical efficiency of the banking industry of both countries improved gradually over the years, especially after 1995. Unlike public sector banks in India, public sector banks in Pakistan witnessed improvement in scale efficiency only. It is also found that banks are relatively more efficient in generating earning assets than in generating income. This is attributed to the presence of high non-performing loans. In addition, it is found that the gap between the pure technical efficiency of different size groups has declined over the years.

Item Type: Journal Item
ISSN: 0003-6846
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: 50870
Depositing User: Ali Ataullah
Date Deposited: 07 Sep 2017 15:47
Last Modified: 07 Dec 2018 10:56
URI: http://oro.open.ac.uk/id/eprint/50870
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