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

Authors: Fadzlan Sufian

Addresses: Khazanah Research and Investment Strategy, Khazanah National Berhad, Level 33 Tower 2 Petronas Twin Towers, Kuala Lumpur City Centre, 50088 Kuala Lumpur, Malaysia

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.

Keywords: Asian financial crisis; bank efficiency; DEA; data envelopment analysis; panel regression analysis; Malaysia; foreign banks; domestic banks; banking; technical efficiency.

DOI: 10.1504/IJMEF.2010.031234

International Journal of Monetary Economics and Finance, 2010 Vol.3 No.2, pp.140 - 158

Published online: 26 Jan 2010 *

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