Authors: Tianshu Zhao, Barbara Casu, Alessandra Ferrari
Addresses: Bangor Business School, Bangor University, Gwynedd LL57 2DG, UK; Department of Economics, The University of Reading, Whiteknights, Reading, RG6 6AH, UK. ' Cass Business School, City University, EC1Y 8TZ, London. ' Department of Economics, The University of Reading, Whiteknights, Reading, RG6 6AH, UK
Abstract: Using a balanced panel data set covering the period of 1992–2004 and employing a Data Envelopment Analysis (DEA)-based Malmquist Total Factor Productivity (TFP) index, this paper aims to examine the impact of regulatory reform on the performance of Indian commercial banks. We also explore whether deregulation has had a different impact on the performance of public, private and foreign banks and whether it affected the risk-taking behaviour of market participants. The empirical results seem to indicate that, after an initial adjustment phase, the Indian banking industry experienced sustained productivity growth, which was driven mainly by technological progress. Banks| ownership structure per se does not seem to matter as much as increased competition in TFP growth. Foreign banks appear to have acted as technological innovators when competition increased, which added to the competitive pressure in the banking market. Finally, our results also indicate an increase in risk-taking behaviour, along with the whole deregulation process.
Keywords: deregulation; Indian banking; productivity change; Malmquist index; India; productivity growth; commercial banking; data envelopment analysis; DEA; total factor productivity; TFP; regulatory reform; technological innovation; risk taking.
International Journal of Business Performance Management, 2008 Vol.10 No.4, pp.318 - 343
Published online: 20 Aug 2008 *Full-text access for editors Access for subscribers Purchase this article Comment on this article