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Productivity measurement of commercial banks in Malaysia with non-performing loans

Author

Listed:
  • Noor Asiah Ramli
  • S. Sarifah Radiah Shariff
  • Nurhayati Hamid

Abstract

In the banking sector, productivity has been considered essential to the development process. This study is determining the productivity of 20 commercial banks in Malaysia consisting of eight domestic banks and 12 foreign banks between the year 2005 and 2014. The Malmquist Luenberger productivity index (MLPI) approach is employed when incorporating undesirable output, i.e., non-performing loan. The productivity measured using MLPI shows that the foreign banks perform at a higher productivity change progression compared to domestic banks. The total geometric mean for productivity change in 2008/2009 is found to be the highest percentage of deterioration which is 17.4%, while the maximum progress of productivity is reported in 2010/2011 which is 25.2%. Overall, the finding exhibits that technological changes, i.e., the innovation effect is the main contributor to the productivity changes during the study period.

Suggested Citation

  • Noor Asiah Ramli & S. Sarifah Radiah Shariff & Nurhayati Hamid, 2019. "Productivity measurement of commercial banks in Malaysia with non-performing loans," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 21(5), pages 666-682.
    • Handle: RePEc:ids:gbusec:v:21:y:2019:i:5:p:666-682
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