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Impact of financial reforms on efficiency of state-owned, private and foreign banks in Pakistan

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  • Abid Burki
  • G. S. K. Niazi

Abstract

This article uses a unique bank level data from 1991 to 2000 and evaluates how financial reforms affect banking efficiency of domestic and foreign banks in Pakistan. The results suggest that banking efficiency falls during initial reform period when banks adjust to enhanced competition but increases in more advanced stages of reform. While in general foreign and private banks show superior efficiency and factor productivity than do state-owned banks, the relative performance of foreign banks worsens after the consolidation stage of the financial reforms is over. We show the importance of link between bank size, asset quality and bank branches with efficiency indexes and also note that every 10% increase in share of nonperforming to total loans decreases banking efficiency by 6 to 10%.

Suggested Citation

  • Abid Burki & G. S. K. Niazi, 2010. "Impact of financial reforms on efficiency of state-owned, private and foreign banks in Pakistan," Applied Economics, Taylor & Francis Journals, vol. 42(24), pages 3147-3160.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:24:p:3147-3160
    DOI: 10.1080/00036840802112315
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    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
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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