Title: Assessing the long-term impact of reforms and privatisation on the banking industry of Pakistan

Authors: Yaseen Ghulam

Addresses: Economics and Finance Subject Group, Portsmouth Business School, University of Portsmouth, Richmond Building, Portland Street, PO1 3DE, UK; Postgraduate Studies and Scientific Research, Al Yamamah University, 7010 King Fahd Road, Al Qirawan, Riyadh 13541, Saudi Arabia

Abstract: This study examines the long-term impact of privatisation and broader reforms of the banking industry in Pakistan over a quarter of a century. We conclude that following the reforms and changes of ownership, as expected, banking firms made an adjustment to their input usage by switching from labour saving to labour using after the reforms, but vice versa for purchased funds. Simple descriptive statistics of the productivity estimates reveal that banking firms did not experience any improvement in productivity (medium-sized and private firms in particular). Operating nationwide has a clear advantage in terms of productivity growth compared, with operating only in urban centres with a limited number of branches. More importantly, when the productivity estimates are regressed on a number of explanatory variables to control for bank-specific factors and the economic, financial, industrial and political environment, we conclude that the reforms and changes of ownership have indeed made privatised banking firms in particular more productive.

Keywords: total factor productivity; TFP; reforms; privatisation; technological progress; input bias; banking industry; Pakistan.

DOI: 10.1504/IJBAAF.2020.110311

International Journal of Banking, Accounting and Finance, 2020 Vol.11 No.4, pp.461 - 494

Accepted: 04 Apr 2019
Published online: 24 Apr 2020 *

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