Ahmad, Usman and Farooq, Shujaat and Jalil, Hafiz Hanzla (2009): Efficiency Dynamics and Financial Reforms: Case Study of Pakistani Banks. Published in: International Research Journal of Finance and Economics No. 25 (2009) (2009): pp. 172-182.
Download (69kB) | Preview
Banking sector in Pakistan were facing problems of weak health and low profitability due to various factors i.e. low productivity, high intermediation cost (high cost deposits), huge expenditures on establishment, over staffing, large number of loss making branches and mismanagement of funds etc. Owing to this, banking sector in Pakistan was under great deal of pressure to maintain their profitability. To overcome these issues, Pakistan undertook financial sector reforms in early 1990s with financial support of World Bank and Japanese government under the banking sector adjustment loan (BSAL) program. The main goal of these reforms was to improve the Total Factor Productivity (TFP) of financial system through separating ownership, management and strengthening the accountability mechanism. Using the data sets of 20 domestic commercial banks of Pakistan, this study is intended to measure the banking efficiency through Data Envelopment Analysis (DEA) Malmquist Index of Total Factor Productivity (TFP) from 1990 to 2005 to access the impact of reforms on banking sector. The analysis is useful not only for policy makers but it also assess the impact of reforms on domestic commercial banks of Pakistan
|Item Type:||MPRA Paper|
|Original Title:||Efficiency Dynamics and Financial Reforms: Case Study of Pakistani Banks|
|English Title:||Efficiency Dynamics and Financial Reforms: Case Study of Pakistani Banks|
|Keywords:||Reforms, Banking, TFP analysis|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages|
|Depositing User:||Usman Ahmad|
|Date Deposited:||09. May 2009 07:34|
|Last Modified:||12. May 2015 01:40|
Akhter M Hanif (2002), “X-Efficiency Analysis of Commercial Banks in Pakistan: A Preliminary Investigation”. The Pakistan Development Review, Part II.
Aly, H.Y., R. Grabowski, C. Pasurka and N. Rangan (1990), “Technical, Scale and Allocative Efficiencies in U.S Banking: An Empirical Investigation”. The Review of Economics and Statistics.
Banking Statistics of Pakistan (various issues) by State Bank of Pakistan
Banker, R.D., A. Charnes, and W.W. Cooper (1984), “Some Models for Estimating Technical and Scale Efficiencies in DEA Models”. Management Science.
Berger y Humphery (1997), “Efficiency of Financial Institutions: International Survey and Directions for Future Research”. European Journal of Operations Research (especial issue) vol. 98.
Berg, S.A. (1993), “Banking Efficiency in the Nordic Countries”. Journal of Banking and Finance.
Berg, S.A., Forsund, F.R., Jansen, E.S. (1991), "Technical efficiency of Norwegian banks: the non-parametric approach to efficiency measurement", The Journal of Productivity Analysis, Vol. 2 No.1, pp.127-42.
Berger, A., Leusner, J., Mingo, J., (1997), “The efficiency of bank branches”. Journal of Monetary Economics
Berger, A.N., Humphrey, D.B. (1990), "Measurement and efficiency issues in commercial banking", Charleston, SC., paper presented at a NBER Conference on Research on Income and Wealth,
Burki, Abid A. and Niazi, Ghulam Shabbir Khan (2003), “The Effects of Privatization, Competition and Regulation on Banking Efficiency in Pakistan, 1991 – 2000”. Regulatory Impact Assessment: Strengthening Regulation Policy and Practice, Chancellors Conference Centre, University of Manchester, Manchester, UK
Caves, D.W., Christenson and Diewert, W.E. (1982), “The Economic Theory of Index Numbers and Measurement of Input, Output and Productivity”, Econometrica, vol.50,pp. 1393-1414
Charness A., Cooper W. & Rhodes E. (1978): “Measuring the Efficiency of Decision Making Units”. European Journal of Operations Research vol. 26
Coelli, T. 1996. “A Guide to DEAP Version 2.1 A Data Envelopment Analysis (Computer) Program”. CEPA Working Paper 96/08.
Din, ud M, Ghani, E and Qureshi, S K. (1996) “Scale and Scope Economies in Banking: A Case Study of the Agriculture Development Bank (ZTBL) of Pakistan”. The Pakistan Development Review. Vol: 35 pp. 203-213
Fare, R., Grosskopf,S., Norris,M. and Zhang, Z (1994), “ Productivity Growth, Technical Progress and Efficiency Change in Industrialized Countries”, American Economic Review, 84, pp.66-83.
Fare, R S G and Knox L C.A. (1994). Production Frontiers. Cambridge: Cambridge University Press.
Favero, C. A. and Papi, L. (1995). “Technical Efficiency and Scale Efficiency in the Italian Banking Sector: A Non-Parametric Approach”, Applied Economics, Vol. 27
Ferrier, G.D., and Knox Lovell (1990), “Measuring Cost Efficiency in the Banking: Econometric and Linear Programming Evidence”. Journal of Econometrics.
Government of Pakistan, (2005-2006), “The Economic Survey”, Ministry of Finance, Economic Advisory Wing, Islamabad.
Haque, Nadeem, 1997, “Financial Market Reform in Pakistan,” The Pakistan Development Review, Part II.
Hardy, D., Patti, E., (2003), “The Effects of Banking System Reforms in Pakistan” IMF Working Paper.
Hardy, Daniel C., and Emilia Bonaccorsi De Patti (2001), “Bank Reforms and Bank Efficiency in Pakistan”. IMF Working Paper WP/01/138).
John C. Topuz, Ali F. Darrat and Roger M. Shelor (2005), “Technical, Allocative and Scale Efficiencies of REITs: An Empirical Inquiry” Journal of Business Finance & Accounting.
Khan, A H. (1995), “Need and Scope for Further Reforms in the Financial Sector in Pakistan”. Journal Bankers Institute of Pakistan.
Klien, U.M (1992), “Commercial Banking in Pakistan” In Anjum Nasim (ed), Financing Pakistan’s Development in the 1990s, Oxford University Press, Karachi.
Limi Atsushi (2002), “Efficiency in the Pakistani Banking Industry: Empirical Evidence after the Structural Reforms in the Late 1990s” Unpublished
Mlima & Hjalmarsson (2002), “Measurement of Inputs and Outputs in the Banking Industry” Tanzanet Journal vol. 3(1).
Pamela E. and Emilyn Cabanda (2005), “An Empirical Analysis of TFP Gains in the Philippine Food Processing Industry: A Multi-criteria Approach” Journal of Asian Studies on the Pacific Coast.
Parkan, C. (1987), "Measuring the efficiency of service operations: an application to bank branches", Engineering Costs and Production Economics, Vol. 12 No.2, pp.237-42.
Qayyum, A. and Ahmad, M. (2006) Efficiency and Sustainability of Micro Finance Institutions in South Asia, South Asian Network of Economic Research Institutes (SANEI)
Rafi Khan and Safiya Aftab (1994), “Assessing the Impact of Financial Reforms on Pakistan’s Economy”. Pakistan Journal of Applied Economics. Rangan, N., Pasurka, Hassan, .C., Grabowski, R. (1988), "The technical efficiency of US banks", Economics Letters, Vol. 28 No.2, pp.169-75.
Resti, A. (1994), "Bank efficiency and returns to scale: a data envelopment analysis of Italian banks", Political Economics, Vol. 10 No.2, pp.269-91.
Rizvi (2001), “Post-liberalisation Efficiency and Productivity of the Banking Sector in Pakistan”. The Pakistan Development Review.
Sathye M. (2003), “Efficiency of Banks in Developing Economy: The Case of India” European Journal of Operations Research.
Seiford, L.M, and R.M. Thrall (1990), “Recent Development in DEA: The Mathematical Programming Approach to Frontier Analysis”. Journal of Econometrics
Sherman, H.D., Gold, F. (1985), "Bank branch operating efficiency", Journal of Banking and Finance, Vol. 9 No.2, pp.297-315.
State Bank of Pakistan (2001). Pakistan Financial Assessment, 1990 – 2000. Karachi: Research Department, State Bank of Pakistan.
State Bank of Pakistan (2002). Pakistan Financial Assessment, 2001 – 2002. Karachi: Research Department, State Bank of Pakistan.
State Bank of Pakistan (2003). Pakistan Financial Assessment, 2003. Karachi: Research Department, State Bank of Pakistan.
State Bank of Pakistan (2004). Pakistan Financial Assessment, 2004. Karachi: Research Department, State Bank of Pakistan.
Yue, P. (1992), "Data envelopment analysis and commercial bank performance: a primer with applications to Missouri banks", Federal Reserve Bank of St Louis, pp.31-45.