The Estimation of Stochastic Cost Functions of Malaysian Commercial Banks and Its Policy Implications to Bank Restructuring

Hidenobu Okuda, 英信 奥田, ヒデノブ オクダ, Hidetoshi Hashimoto, 英俊 橋本, ヒデトシ ハシモト, Michiko Murakami and 美智子 村上

No 2003-2, CEI Working Paper Series from Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University

Abstract: The present paper examines stochastic cost functions of Malaysian commercial banks from 1991 to 1997 periods and catches the changes in their management structure and technical efficiency. Then, we also discuss policy implications for bank integration and competition policy which is the part of current financial reform that reinforces the banking sector. However, little microeconomic analysis of the Malaysian banking business has been conducted. The only known serious academic research in this area is by (Katib and Mathews, 2000). The present paper contributes to the expansion of their study in two respects. Firstly, we have estimated the cost function, availing ourselves of SEA based on a parametric approach. Secondly, our model also includes as a factor the existence of bad debts. According to our results, we observed economies of scale clearly, but economies of scope and technological progress were not observed. Regarding the policy implication, the result of our analysis suggests strongly that the current policy is appropriate.

Keywords: Economies of scale; Economies of scope; Technical efficiency; Cost function; Banking; Malaysia; Financial liberalization (search for similar items in EconPapers)
JEL-codes: C13 D24 F36 G21 G28 O31 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2003-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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