Financial crisis and the efficiency of the Malaysian banking sector: foreign vs. domestic banks

Abstract

By employing the Data Envelopment Analysis (DEA) method, the present paper investigates the performance of the Malaysian banking sector around the Asian financial crisis with the emphasis on the domestic vs. foreign banks debate. The results suggest that the foreign banks have exhibited higher technical efficiency compared to their domestic bank counterparts. However, the results suggest that the foreign banks were severely affected by the Asian financial crisis, implying that the foreign banks were not insulated from unexpected events like the Asian financial crisis in 1997.