Determinants of Bank Efficiency in ASEAN5: Size as a Control Variable

Randi Anto,Irene Rini Demi Pangestusti,Eriesta Novia Purwandari

doi:10.13189/ujaf.2021.090402

Abstract

Purpose – The purpose of this study was to analyze the effect of Bank Age, Loan to Assets Ratio (LAR), Net Interest Margin (NIM), and non-interest margin (Non NIM) on bank efficiency, especially in ASEAN-5 countries (Indonesia, Singapore, Thailand, Malaysia and Philippines). In this research, bank size was used as a control variable. Design/methodology/approach – The sample of the research was taken form general banking entities listed in each country over the period of 2014-2018. Purposive sampling method was used to select 58 banks as the sample population. We use two-stage methodology in this research by using Data Envelopment Analysis (DEA) to calculate bank efficiency and Multiple Regression Analysis (MRA). Findings- The result showed that capitalization and bank age had a negative significant effect on bank efficiency, while the variable of Loan to Asset Ratio (LAR), Net Interest Margin (NIM) and No-NIM had a positive significant effect on bank efficiency. Originality/value – The measurement of bank efficiency was conducted by utilizing DEA in this study to examine the bank efficiency in ASEAN 5.

Highlights

Studies on the determinants of banking efficiency have generally been carried out in developed countries and rarely been done in developing countries
The determinants of efficiency represented by various variables, such Capitalization, Bank Age, and Loans to Assets Ratio (LAR), Net Interest Margin (NIM), and non-interest margin (No-NIM) are in need to be explored
Net Interest Margin (NIM) in the research of Partovi & Matousek [4] shows a positive effect on efficiency, but this is contrary to the findings of Fukuyama and Matousek [10]

Summary

Introduction

Studies on the determinants of banking efficiency have generally been carried out in developed countries and rarely been done in developing countries. In the concept of learning by doing in research of Partovi & Matousek [4]; Sinaga et al, [8] bank age affects bank efficiency positively. This is not in line with the findings of Adeabah et al, [9] and Fukuyama & Matousek [10]. Net Interest Margin (NIM) in the research of Partovi & Matousek [4] shows a positive effect on efficiency, but this is contrary to the findings of Fukuyama and Matousek [10]. Other factors such as No-NIM have a positive influence on efficiency Fukuyama & Matousek [10], whereas, according to the research of Partovi & Matousek [4], No-NIM has a negative effect on bank efficiency

Objectives

Methods

Findings

Discussion

Conclusion