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Cost efficiency in Bangladesh banking: does financial reform matter?

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  • Iftekhar Robin
  • Ruhul Salim
  • Harry Bloch

Abstract

This article estimates the cost efficiency of the commercial banks of Bangladesh in the context of financial reform. Employing the single-stage stochastic frontier analysis (SFA) model, the study uses a unique balanced panel data set comprising bank-level annual data from the dominant commercial banks in Bangladesh for the period 1983–2012. The results show that bank cost has fallen due to financial deregulation. Our results from the data envelopment analysis do not vary significantly that we obtained from the SFA. In addition, the presence of politically linked directors on the bank board has an adverse effect on efficiency. These findings suggest that further reforms aiming at removing all sorts of political influence should continue to ensure competitive environment in order to achieve cost efficiency in the financial sector of the country.

Suggested Citation

  • Iftekhar Robin & Ruhul Salim & Harry Bloch, 2018. "Cost efficiency in Bangladesh banking: does financial reform matter?," Applied Economics, Taylor & Francis Journals, vol. 50(8), pages 891-904, February.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:8:p:891-904
    DOI: 10.1080/00036846.2017.1346361
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    References listed on IDEAS

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    1. Berger, Allen N. & Kick, Thomas & Schaeck, Klaus, 2014. "Executive board composition and bank risk taking," Journal of Corporate Finance, Elsevier, vol. 28(C), pages 48-65.
    2. repec:aei:rpaper:39388 is not listed on IDEAS
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    Cited by:

    1. Asmild, Mette & Kronborg, Dorte & Mahbub, Tasmina & Matthews, Kent, 2019. "The efficiency patterns of Islamic banks during the global financial crisis: The case of Bangladesh," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 67-74.
    2. Kiemo, Samuel & Kamau, Anne, 2020. "Banking sector competition and intermediation efficiency in Kenya," KBA Centre for Research on Financial Markets and Policy Working Paper Series 42, Kenya Bankers Association (KBA).
    3. Md. Hashibul Hassan & Mahmudul Hassan, 2018. "Cost efficiency of banking sector of Bangladesh: evidence using the stochastic frontier analysis," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 8(6), pages 208-224, June.
    4. Nusrat Jahan, 2020. "An Investigation into the Equivalency of Three Performance Dimensions: Evidence from Commercial Banks in Bangladesh," Papers 2005.09483, arXiv.org.
    5. World Bank, "undated". "South Asia Economic Focus, Spring 2020," World Bank Publications - Reports 33478, The World Bank Group.
    6. Saleh Shahriar, 2021. "Rashed Al Mahmud Titumir, Numbers and Narratives in Bangladesh’s Economic Development," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 22(2), pages 250-253, September.

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