Total Factor Productivity of Thai Banks in 2007-2010: An Application of DEA and Malmquist Index

Thanh, Ngo and Linh Thi Phuong, Nguyen (2012): Total Factor Productivity of Thai Banks in 2007-2010: An Application of DEA and Malmquist Index. Published in: Journal of Applied Finance & Banking , Vol. 2, No. 5 (November 2012): pp. 27-42.

Abstract

This research employs the Data Envelopment Analysis (DEA) and Malmquist index approaches to evaluate the efficiency and Total Factor Productivity (TFP) changes of Thai banking system in the period of 2007-2010 using panel data of 27 major banks in Thailand. This paper shows that the global crisis had a late effect on Thai banks as the TFP only dropped in 2010. While the local banks maintained their stable, foreign banks were more fluctuating – some improved their TFPs, some did not and become worst performers in the system. The reason behind it may relate to the fact that Thai banking system is currently running at decreasing returns to scale situation, which proposes that Thai banks are wasting resources in over-expansion. Hence, continuing to develop and restructuring the banking system is an emergence task for Thailand in the near future.

• Item Type: MPRA Paper
• Language: English
• Keywords: Thai banking system, efficiency, data envelopment analysis, Malmquist index, Global financial crisis
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation

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