Title: Sources of banks' productivity growth in a developing economy: efficiency change or technological progress?

Authors: Fadzlan Sufian

Addresses: Department of Economics, Faculty of Economics and Management, Universiti Putra Malaysia, Serdang 43400, Selangor, Malaysia; Khazanah Research and Investment Strategy, Khazanah Nasional Berhad, Level 35, Tower 2, Petronas Twin Towers Kuala Lumpur City Centre, Kuala Lumpur 50088, Malaysia

Abstract: This paper examines the sources of total factor productivity in the Thailand banking sector during 1999–2008. We employ the output-oriented Malmquist productivity index first, proposed by Shephard (1970) to isolate efforts to catch up to the frontier (efficiency change (EFFCH)) from shifts in the frontier (technological change (TECHCH)). We also explore main sources of EFFCH: either improvements in management practices (pure technical efficiency change) or optimal size (scale efficiency change). The findings indicate that the majority of the medium banks (MED_BNKS) and large banks have exhibited productivity growth, while the majority of the small and MED_BNKS have experienced productivity regress.

Keywords: banking; MPI; Malmquist productivity index; Thailand; developing economies; technological change; total factor productivity; management improvements; technical efficiency change; optimal size; scale efficiency change; medium banks; large banks; small banks; productivity growth; productivity regress; bank productivity.

DOI: 10.1504/IJMED.2010.036121

International Journal of Management and Enterprise Development, 2010 Vol.9 No.2, pp.179 - 200

Published online: 22 Oct 2010 *

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