Dynamics of total factor productivity growth: An empirical analysis of Indian commercial banks

Mohammad Shahid Zaman, Vipin Valiyattoor and Anup Kumar Bhandari

The Journal of Economic Asymmetries, 2022, vol. 26, issue C

Abstract: This paper investigates the total factor productivity (TFP) change scenario among Indian commercial banks during 1998–2017. We measure the change in the Malmquist TFP index and decompose this into technological, efficiency, and scale change components using data envelopment analysis (DEA). Further, the bootstrap-based Simar and Wilson (2007) procedure is applied to correct the bias from the conventional DEA estimates. We also explain the variations in TFP estimates using a set of bank-specific and macroeconomic variables with a system-generalised method of moments and bias-corrected fixed-effects models. Our results show an improvement in TFP among Indian commercial banks– with growth relatively higher during the pre-crisis than in the post-crisis period. The productivity gains are driven mainly by technological progress rather than efficiency improvements. Amongst different ownership categories, foreign-owned banks achieve the highest overall productivity gains, followed by the domestic privately owned and state-owned banks. Finally, our TFP regression results show that return on assets, diversification, GDP per capita, Herfindahl–Hirschman Index, and inflation are the main variables responsible for driving these total factor productivity differences.

Keywords: Total factor productivity; Data envelopment analysis; Malmquist productivity index; Indian banks (search for similar items in EconPapers)
JEL-codes: C61 D24 G2 G21 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:26:y:2022:i:c:s1703494922000287

DOI: 10.1016/j.jeca.2022.e00268

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