Efficiency, productivity change and corporate value during the period of financial crisis: Evidence from Asia banks

Abstract

This study explored efficiency in the banking industry and applies non-parametric frontier analysis (DEA) to measure the relative efficiency of the banking industry in nine Eastern-Asia countries from 1993 to 2002. Malmquist decomposition was carried out to distinguish efficiency changes from technical changes. The empirical results showed that after the Asian financial crisis (1998 to 2002), technical efficiency was decreasing in Indonesia, Thailand and Malaysia. Furthermore, after the Asian financial crisis the “scale efficiency change ()” and “residual index of scale change under VRS () were important factors affecting the corporate value of banks in Eastern-Asia countries. These findings offer implications for investors in decision-making and considerable policy relevance. From the regulatory and supervisory perspective, the policy direction will be directed towards enhancing the resilience and efficiency of the financial institutions with the aim of intensifying the stability of the financial system. Key words: Technical efficiency, productivity, Malmquist index, Data Envelopment Analysis (DEA), corporate value.