Effect of mergers on efficiency and productivity: some evidence for banks in Malaysia
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The study investigates the extent to which mergers lead to efficiency. The data covers the period 1993-2004, which includes the pre- and post-merger years. This study attempts to evaluate technical efficiency, efficiency change, technical change, and productivity of commercial banks, finance companies, and merchant banks by using a non-parametric Data Envelopment Analysis (DEA) and Malmquist Index approach as the framework for the analyses. It is found that: (i) on an average, productivity across banking institutions increased at an annual rate of 5.8% over the study period; (ii) the results also indicate that almost all of the productivity growth comes from technical change rather than improvement in efficiency change, which contributes to 6.1% of productivity growth, while the latter accounted for 0.2% decline; and (iii) the merger process led to productivity improvements whereby it is observed that the productivity of Malaysia's banking sector has been improved after the implementation of merger program.
Bank Negara Malaysia (BNM) , Malaysian banking system , Banking institutions , Commercial banks , Merchant banks , Finance companies , Licensed banking system
Radam, A., Abdul Hamid, B., Awang Marikan, D. A., & Ismail, F. (2009). Effect of mergers on efficiency and productivity: some evidence for banks in Malaysia. IUP Journal of Bank Management, 8(1), 31-46.