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A Survey of Empirical Literature on Bank Efficiency

Sunil Kumar and Rachita Gulati ()
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Sunil Kumar: South Asian University

Chapter Chapter 4 in Deregulation and Efficiency of Indian Banks, 2014, pp 119-165 from Springer

Abstract: Abstract This chapter presents a survey of empirical literature on bank efficiency. Four key research areas have been identified where most of the research efforts have been devoted in last two decades. These research areas are (i) impact of financial deregulation on bank efficiency, (ii) bank efficiency across ownership types, (iii) cross-country differences in bank efficiency, and (iv) impact of mergers and acquisitions on bank efficiency. In addition, two prominent research issues in the banking efficiency literature have also been discussed in this chapter. The first issue relates with the selection and specification of inputs and outputs in a study on the subject matter. The second issue is on the selection of appropriate frontier efficiency technique to measure bank efficiency. Regarding the first issue, we note that though both intermediation and production approaches are not perfect to model the production process of banking firms, but the former dominates the latter in the empirical applications because it is better suited to capture the decisions taken to minimize the cost of the financing mix. On the second issue, we note that a bank’s efficiency score can differ completely due to the measurement technique, and there is virtually no consensus on the preferred estimation method of bank efficiency.

Keywords: Data Envelopment Analysis; Private Bank; Foreign Bank; Stochastic Frontier Analysis; Free Disposal Hull (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/978-81-322-1545-5_4

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