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The evaluation of East Asian banks by considering economic and political conditions as well as country risk

Alireza Tamadonnejad (), Aisyah Abdul-Rahman, Mariani Abdul-Majid () and Mansor Jusoh
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Alireza Tamadonnejad: Universiti Kebangsaan Malaysia
Aisyah Abdul-Rahman: Universiti Kebangsaan Malaysia
Mansor Jusoh: Universiti Kebangsaan Malaysia

International Economics and Economic Policy, 2017, vol. 14, issue 1, No 2, 27-41

Abstract: Abstract This paper evaluates the performance of East Asian banks during the period of 2000–2010 by controlling country-specific conditions comprehensively. Particularly, it seeks to show that country-specific conditions are significant factors in estimating the common frontier by which the performance of all banks are compared. Thus, disregarding political conditions, regulatory environments, and country risk would lead to inaccurate efficiency scores because of the inaccurate common frontier. Following this further, an inaccurate measure of bank performance can hardly reveal bank problems before turning into a crisis. Our results confirm the significant impact of country-specific conditions on the common frontier, and hence bank efficiencies. The findings suggest that researchers, bank managers, and regulators also consider other factors other than economic conditions in their evaluations and decisions.

Keywords: Country risk; East Asian banks; Efficiency; Output distance function; Political stability (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s10368-015-0318-y

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