A cross-country efficiency and productivity evaluation of commercial banks in South Asia: A meta-frontier and Malmquist productivity index approach

Abstract

South Asia primarily consists of developing economies with diverse financial systems. The commercial banking industry plays a crucial role in each country’s financial development in the region. This research aims to evaluate commercial banking industries’ efficiency and productivity growth in the South Asian (SA) region over 6 years (2013–2018). In addition, the technology gap among the banking industries of all countries is also explored. Data envelopment analysis (DEA) Meta-frontier is employed to measure the technical efficiency (TE) and technology gap ratio (TGR) among the countries. Further Malmquist productivity index (MPI) is used for productivity change estimation. Results indicate that, on average, 147 commercial banks (CBs) have a technical efficiency score of 0.6208, while CBs in Nepal are the most efficient in the region with an average score of 0.7153. The Meta frontier analysis also confirms the presence of different production technologies in CBs. Nepal’s CBs group frontier is closer to meta-frontier (technology gap ratio, TGR = 0.9361) While, Bangladesh, Pakistan, India, and Sri Lanka rank second, third, fourth, and fifth, respectively. The results of productivity contend that the total factor productivity change of all 147 CBs decreases by 0.8 percent on average over the study period. CBs have enhanced their productivity growth in Sri Lanka, Nepal, and Pakistan, but declining trends have been witnessed in Indian and Bangladesh’s commercial banking industries.

Government innovation subsidy, executives’ academic capital and innovation quality: Evidence from pharmaceutical companies in China

“…The government’s role is as follows: (1) Government innovation subsidy necessitates a thorough analysis and evaluation of the level of technological innovation capabilities of companies as well as the technical components, development possibilities, and economic contributions of grant-seeking initiatives. This policy contains a wealth of useful and essential market information ( Zúñiga-Vicente et al, 2014 ; Wu and Zhao, 2022 ; Shah et al, 2022b ). (2) The acquisition of an innovation subsidy by a corporation is an official acknowledgment of its R&D technology level, and the research project obtain innovation subsidy undoubtedly sends a positive signal regarding its technological superiority ( Schneckenberg et al, 2015 ).…”

Productivity analysis of Sri Lankan cooperative banks: input distance function approach

“…Literature shows that increasing the application of ICT in banking operations enhances the performance of bank branches considerably (Maldeni and Jayasena 2009 ; Binuyo and Aregbeshola 2014 ). This is further evident in Sri Lankan commercial banks as they have recorded an increase in total factor productivity growth by 1.37% in the period from 2013 to 2018 mainly due to technological change (Shah et al 2022 ). As a result, our findings highlight the significance of taking progressive efforts to improve the use of ICT in CRB operations.…”

“…Overall, mean total factor productivity shows a decline of 1.9% whereas domestic banks show a decreasing trend and foreign banks show a growing trend. In one of the most recent studies, Shah et al ( 2022 ) employed a DEA Meta-frontier Malmquist productivity index approach to examine the cross-country efficiency and productivity of commercial banks in five South Asian countries. Nepalese commercial banks are the most efficient and closest to the meta-frontier of the five countries, whereas Sri Lankan commercial banks are ranked fifth.…”

Determinants of bank’s efficiency in an emerging economy: A data envelopment analysis approach

“…The internal determinants are the Corporate Governance of the bank, Enterprise Risk Management, Ownership Structure (state, foreign, and domestic ultimate owned banks), return on equity, financial leverage, and bank size, while the external determinants of the Efficiency of banks are banking structure and macroeconomic condition in the specified Model. Recent studies evaluated bank efficinecy through DEA like [13][14][15][16][17][18][19][20] The current paper provides empirical evidence of institutional theory in the banking sector. The corporate governance practices of banks improve the Efficiency of the banks due to sound governance structure, fewer principal-agent problems, and efficient implementation of rules and regulations.…”