Bank Efficiency and the Bond Markets: Evidence from the Asia and Pacific Region

Donghyun Park, Shu Tian () and Qiongbing Wu ()
Additional contact information
Shu Tian: Asian Development Bank
Qiongbing Wu: Western Sydney University

No 612, ADB Economics Working Paper Series from Asian Development Bank

Abstract: This study examines the impact of bond markets on both bank profit and cost efficiency. By employing the stochastic frontier approach and utilizing a large micro dataset for 926 banks covering 27 economies from the Asia and Pacific region over the period from 2004 to 2017, we find that both the bond market development and bond market structure are relevant to bank efficiency. The development of bond markets generally has a positive (negative) effect on bank profit (cost) efficiency. Given the development level of the aggregate bond market, increasing the proportion of corporate bonds will enhance both bank profit and cost efficiency. Moreover, given the development level of a country’s corporate bond market, a greater share of local currency corporate bonds is significantly and positively related to both bank profit and cost efficiency. In addition, increasing share of bank-issued corporate bonds in corporate bonds significantly increases (decreases) bank profit (cost) efficiency. Overall, our results point to the significant importance of local currency corporate bonds to the overall bank efficiency. Our findings provide important implications for both policy makers and bank management.

Keywords: Asia and Pacific region; bank efficiency; bond market development; bond market structure; stochastic frontier analysis (search for similar items in EconPapers)
JEL-codes: D20 G21 G28 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020-03-16
New Economics Papers: this item is included in nep-cwa, nep-eff, nep-fdg and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.adb.org/publications/bank-efficiency-bond-markets-asia-pacific Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0612

Access Statistics for this paper

More papers in ADB Economics Working Paper Series from Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines. Contact information at EDIRC.
Bibliographic data for series maintained by Orlee Velarde ().