Cost Efficiency of the Hong Kong Banking Sector: A Two-Stage DEA Window Analysis

Robert Alexander, Hien Thu Phan and Sajid Anwar

No 9846, EcoMod2016 from EcoMod

Abstract: The paper addresses two questions: (i) how efficient is Hong Kong’s banking sector? and (ii) what are the determinants of banking sector efficiency in Hong Kong? The cost efficiency of the Hong Kong Banking sector over the period 2004 to 2014 is estimated by both traditional DEA and DEA window analysis. The determinants of the efficiency scores are then investigated using a truncated regression model. Data Envelopment Analysis. The efficiency estimates indicate an overall decrease in cost efficiency in the middle of the period, coincident with the Global Financial Crisis and, then, some recovery in efficiency. A second stage regression analysis finds that bank size and GDP growth are positively associated with efficiency, whereas revenue diversification and inflation are associated with lower efficiency. Stock exchange listing status appears to be associated with lower efficiency but no clear relationship between measures of market structure and efficiency is found.

Keywords: Hong Kong; Finance; Optimization models (search for similar items in EconPapers)
Date: 2016-07-04
New Economics Papers: this item is included in nep-ban and nep-eff
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Persistent link: https://EconPapers.repec.org/RePEc:ekd:009007:9846

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