Consolidation and efficiency: Evidence from non-bank financial institutions in Malaysia

Fadzlan Sufian () and Muhamed Zulkhibri Abdul Majid ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the efficiency changes of finance and merchant banking institutions in Malaysia, during and post-consolidation periods by applying the non-parametric Data Envelopment Analysis (DEA). The evidence suggests that pure technical efficiency is more related to overall efficiency than scale efficiency. On average, 28.7% of finance and merchant banking institutions are operating at CRS, while the majority are scale inefficient. Our results from the Tobit regression analysis further confirmed that the level of equity capital is positively related with the level of efficiency gain. Financial institutions with higher ratio of loans to assets are related to higher level of efficiency. This might reflect the degree of market power exists in the loan markets compared to the other product markets with institutions developed their strategic niche within the market.

Keywords: Non-Bank Financial Institutions; Data Envelopment Analysis (DEA); Malaysia; Tobit (search for similar items in EconPapers)
JEL-codes: G28 G21 (search for similar items in EconPapers)
Date: 2007-03-01, Revised 2007-05-01
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