Template-Type: ReDIF-Article 1.0
Author-Name:  Mohd. Azmi Omar
Author-Workplace-Name: Institute of Islamic Banking and Finance, International Islamic University Malaysia, P.O. Box 10, 50728 Kuala Lumpur, Malaysia  
Author-Name:  Abdul Rahim Abdul Rahman 
Author-Workplace-Name: Institute of Islamic Banking and Finance, International Islamic University Malaysia, P.O. Box 10, 50728 Kuala Lumpur, Malaysia 
Author-Email:   abdulrahim@iiu.edu.my  
Author-Name:  Rosylin Mohd. Yusof 
Author-Workplace-Name: Institute of Islamic Banking and Finance, International Islamic University Malaysia, P.O. Box 10, 50728 Kuala Lumpur, Malaysia  
Author-Name:  M. Shabri Abd. Majid 
Author-Workplace-Name: Institute of Islamic Banking and Finance, International Islamic University Malaysia, P.O. Box 10, 50728 Kuala Lumpur, Malaysia  
Author-Name:  Mohd. Eskandar Shah Mohd. Rasid 
Author-Workplace-Name: Institute of Islamic Banking and Finance, International Islamic University Malaysia, P.O. Box 10, 50728 Kuala Lumpur, Malaysia  
Title: Efficiency of Commercial Banks in Malaysia
Abstract: This study investigates the change in the productivity of banking industry during the period of 2000 to 2004. The data consists of a panel of 11 commercial banks in Malaysia namely Malayan Banking, Bumiputra-Commerce, Public Bank, RHB Bank, Hong Leong Berhad, EON Bank, Affin Bank, Southern Bank Berhad, Bank Islam Malaysia Berhad (BIMB), Ambank and Bank Muamalat. Productivity is measured by the Malmquist index, using a Data Envelopment Analysis (DEA) technique. The Malmquist productivity measures are decomposed into two components: efficiency change and technical change index. Efficiency change is again decomposed into pure efficiency and scale efficiency. Overall, the results show that Total Factor Productivity (TFP) has slightly increased for the whole industry in which efficiency change is found to be the most important source of productivity growth to Malaysia's banking industry as compared to technical component that contributes a negative change to the overall TFP growth. In this case, the scale efficiency is found to be a more important source of efficiency change than pure efficiency component. This implies that the size does matter in improving bank efficiency. Negative growth of technical efficiency indicates a great potential for the industry to increase productivity through higher utilization of technology as well as technological knowledge dispersion. Continuous training programs to familiarize and improve technical expertise appear to offer better prospects for Malaysia's banking industry to achieve greater TFP growth.    
Classification-JEL:
Keywords: Data Envelopment Analysis (DEA), Malmquist index, bank efficiency, Islamic commercial banks in Malaysia Journal: Asian Academy of Management Journal of Accounting and Finance
Pages: 19-42
Volume: 2
Issue: 2
Year: 2006
File-URL: http://web.usm.my/journal/aamjaf/vol 2-2/2-2-2.pdf
File-Format: Application/pdf
Handle: RePEc:usm:journl:aamjaf00202_19-42