Abstract
This study evaluates bank efficiency in Korea using DEA, Window Analysis, and the Malmquist Productivity Index Approach in the period of before and after the 2008 global financial crisis. The data used in this study consists of information from 17 banks for the six- year period from 2005 to 2010 in Korea. There are two inputs and two outputs: two outputs are interest income (IC) and non-interest income (NIC), and two inputs include interest expenses (IE) and non-interest expenses (NIE). Our results are as follow. Based on statistical analysis, the Korean banking industry had been affected by the external environment, that is, the U.S. subprime crisis. Before and after the U.S. subprime crisis, the Korean banking industry’s efficiency had slightly decreased. However, 2 years later, the number of banks at the efficiency frontier began to increase. During the crisis, Korean banks made efforts to reorganize their profit-generating structures, therefore the proportion of non-interest revenue, such as derivatives, has increased. Also, the amount of non-interest expense has increased substantially beyond those input numbers before the financial crisis. Finally, foreign-owned banks performed better than domestic banks during the financial crisis. In the Malmquist index analysis their efficiency changes were conspicuous.
Published Version
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