Abstract
The Financial Master Plan (2001- 2010) aims to enhance the capacity of banking industry so that higher effic iency and productivity can be reaped in the future. This study seeks to determine the impact of merger on the efficiency and productivity ofcommercial banks in Malaysia for the period 1995 until 2005. The study uses a non-parametric approach, nam ely DEA (data envelopment analysis?) to estimate the efficiency scores and to construct the Malmquist productivity index. To enable this estimation, three bank inputs and outputs are used. Amongst the findings are those banks exhibit higher efficiency score after the merger and thefo reign banks are more efficient than the local banks. Productivity of the banks is calculated in both periods, before and after the merger: The results show that, it is the local banks that have improved the most after the merger. The main source of productivity is technical change or innovation. The findings support the existing policy of having larger domestic banks in term of size.
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