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Technical Efficiency of the Banking Sector in Pakistan

Author

Listed:
  • Muhammad Akmal

    (State Bank of Pakistan)

  • Muhammad Saleem

Abstract

This study uses a sample of 30 banks (4 public, 18 local private and 8 foreign banks) and two stage Data Envelopment Analysis (DEA) to provide evidence on the impact of macroeconomic and bank specific factors on banks’ efficiency. We first use DEA to estimate technical and scale efficiency and then Tobit regression approach to find out the impact of several bank-specific and macroeconomic factors. The results indicate that banking efficiency has improved since 2000 and that foreign banks are more efficient than local private and state owned banks; there are technological and total factor productivity growths during 1995 to 2005.

Suggested Citation

  • Muhammad Akmal & Muhammad Saleem, 2008. "Technical Efficiency of the Banking Sector in Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 4, pages 61-80.
    • Handle: RePEc:sbp:journl:33
    as

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    File URL: http://www.sbp.org.pk/research/bulletin/2008/vol4/Technical%20Efficiency%20of%20the%20Banking%20Sector%20in%20Pakistan.pdf
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    References listed on IDEAS

    as
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    4. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    5. Abdul Qayyum, 2005. "Modelling the Demand for Money in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(3), pages 233-252.
    6. Noriega Antonio E. & Ventosa-Santaulària Daniel, 2006. "Spurious Cointegration: The Engle-Granger Test in the Presence of Structural Breaks," Working Papers 2006-12, Banco de México.
    7. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Banking; DEA; Efficiency; Regulation; Tobit regression;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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