scholarly journals Empirical Measurement of Competition in the Thai Banking Industry

Economies ◽  
2020 ◽  
Vol 8 (2) ◽  
pp. 44
Author(s):  
Jirawan Prayoonrattana ◽  
Thanarak Laosuthi ◽  
Bundit Chaivichayachat
Keyword(s):  
Stochastic Frontier Analysis ◽  
Banking Industry ◽  
Stochastic Frontier ◽  
Allocative Efficiency ◽  
Banking System ◽  
Banking Competition ◽  
Frontier Analysis ◽  
Average Value ◽  
Lerner Index ◽  
Efficiency And Effectiveness

The degree of competition in the banking industry can be observed and measured by two approaches, structural and nonstructural. Based on these two approaches, there are various indicators, which are different factors and methods. This paper aims to provide calculations, determine a good indicator, and assess the competitive environment of the Thai banking industry. Specifically, there are four indicators—concentration ratio, Herfindahl–Hirschman Index, Lerner Index, and Panzar–Rosse H statistic—which are widely used to examine the efficiency and effectiveness of policies in the banking industry. The findings indicate that the Lerner Index, calculated by stochastic frontier analysis, is the most reliable indicator of the banking competition environment in Thailand. It has a range of 0.36 to 0.60 and an average value of 0.40. Furthermore, during the period of study, the degree of Thai banking competition had a tendency to increase over time, which reflects an increase in allocative efficiency of resources in the banking industry. This is in accordance with the Financial Sector Master Plan of the country. However, this result probably leads to instability of the financial system. Therefore, policy-makers should carefully regulate competition policy by considering the systematic risk of the banking system at the same time.

scholarly journals Measuring Cost Efficiency of Ukrainian Banks in 2008

2013 ◽  
Vol 15 (4) ◽  
pp. 207-217 ◽  
Author(s):  
Anatoliy Pilyavskyy ◽  
Yuriy Matsiv ◽  
Olga Vovchak
Keyword(s):  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Functional Form ◽  
Statistical Tests ◽  
Stochastic Frontier ◽  
Frontier Analysis ◽  
Average Value ◽  
Personnel Costs ◽  
Banking Activity ◽  
Size Type

The paper presents the results of a stochastic frontier analysis (SFA) of cost-efficiency of Ukrainian banks. As of lack of data on the personnel costs, we had to set limits to the year of 2008 only. To modeling banking activity, we apply the intermediary approach as one of the most commonly used in literature. Considering the results of statistical tests, we chose translog functional form of cost function and half–normal distribution of random inefficiency term. As a result of the research, we found out that efficiency of Ukrainian banks varies within 0.5224 and 0.9869 with an average value of 0.8734. Having checked a range of hypotheses, we discovered insignificant distinctions among banks by their size, type of owner and location.

Measuring efficiency of Vietnamese banks

2017 ◽  
Vol 29 (2) ◽  
pp. 171-182 ◽  
Author(s):  
Thanh Ngo ◽  
David Tripe
Keyword(s):  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Control Variable ◽  
Banking System ◽  
Alternative Methods ◽  
Content Type ◽  
Frontier Analysis ◽  
Using Data ◽  
The Cost

Purpose This paper aims to examine alternative methods for treating nonperforming loans (NPLs) in bank cost-efficiency studies using stochastic frontier analysis (SFA). Design/methodology/approach The authors consider three methods of treating NPLs in SFA: as an additional control variable, as an environmental factor or as a deduction from total loans. Using data from the Vietnamese banking system (2003-2010), the authors then compare these results with those of the base model (where total loans is used regardless of the NPLs) to see which one is more appropriate for this study. Findings The authors observed that the first two methods are inappropriate for the analysis: one cannot find the significant relationship between NPLs and the banks’ total cost, and the other cannot account for any inefficiency at all. The authors suggested that the third method of separating NPLs from total loans can provide better insights. Using the proposed method, the authors showed that the cost-efficiency of Vietnamese banks over the period examined was moderate with a slight decreasing trend. When NPLs are separated, the cost-efficiency decreases in state-owned banks and big banks, whereas it increases in small and private banks. Research limitations/implications Research is limited to Vietnamese banks during a certain period, and it would be useful to apply the same technique to other data sets. Practical implications The paper suggests a new approach to account for NPLs in cost SFA studies in banking. Originality/value The paper provides a much more searching analysis of NPLs in banking than has generally been seen in previous research.

Stochastic cost frontier analysis – a sensitivity analysis on cost measures

2016 ◽  
Vol 28 (4) ◽  
pp. 401-410 ◽  
Author(s):  
Thanh Ngo ◽  
David Tripe
Keyword(s):  
New Zealand ◽  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Banking System ◽  
Alternative Methods ◽  
Data Sets ◽  
Content Type ◽  
Frontier Analysis ◽  
Cost Frontier

Purpose This paper aims to examine alternative methods for recording and treating costs in studies of bank efficiency. Design/methodology/approach This study used stochastic frontier analysis (SFA) models with core costs and total costs to estimate the cost efficiency of banks in two different economies, Vietnam where the banking system is under-developed (and thus is dominated by traditional banking activities) and New Zealand where the banking system is well-developed (and thus non-traditional banking activities play an important role). Findings The authors found that models using total cost tend to underestimate the banks’ cost efficiency. This underestimation relates to the extent of modern activities in a banking system: it is larger in an advanced banking system (i.e. New Zealand) and smaller in a less-developed banking system (i.e. Vietnam). Research limitations/implications Research is limited to two countries, and it would be useful to apply the same technique to other data sets. Practical implications The paper suggests a new approach to cost SFA studies in banking. Originality/value The paper provides a much more searching analysis of costs in banking than has generally been seen in previous research.

scholarly journals Analisi Efisiensi Teknis, Alokatif dan Ekonomi Produksi Kubis di Kabupaten Karo

JURNAL AGRICA ◽  
2021 ◽  
Vol 14 (2) ◽  
Author(s):  
Esra Frandika Barus
Keyword(s):  
Economic Efficiency ◽  
Stochastic Frontier Analysis ◽  
New Technologies ◽  
Stochastic Frontier ◽  
Allocative Efficiency ◽  
Frontier Analysis ◽  
Managerial Skills ◽  
Low Efficiency ◽  
Farming Efficiency ◽  
Input Amount

The needs of cabbages tends to increase. Meanwhile, cabbage production is not optimal and just seasonal. However, demands of cabbages in export field are high so, it makes the cabbage farming is a strategic area to be developed. To increase production through increasing the use of inputs and using new technologies is relatively difficult because it requires high costs. Therefore,  increasing production by improving farming efficiency is a relevant option. Farmers’ managerial skills and their combining various production inputs ability will affect the production. Efficient use of input amount (allocative efficiency) and a good technical efficiency are important for increasing the production. Production of cabbage farming efficiency was analyzed by using stochastic frontier analysis (SFA). The results of the analysis showed that the technical, allocative and economic efficiency of cabbage farming in Karo District had not achieved. The average of the technical, allocative and economic efficiency values of the respondent were 0.697, 0.374 and 0.215. These results indicate that low efficiency is a contributing factor to the low productivity of the cabbage farmer respondents' in Karo District. Several factors that have a significant effect on the efficiency are farming experience, labor ratio, land ownership status and cabbage lifespan.

scholarly journals Changes in Livestock Grazing Efficiency Incorporating Grassland Productivity: The Case of Hulun Buir, China

Land ◽  
2020 ◽  
Vol 9 (11) ◽  
pp. 447
Author(s):  
Zhe Zhao ◽  
Yuping Bai ◽  
Xiangzheng Deng ◽  
Jiancheng Chen ◽  
Jian Hou ◽  
...  
Keyword(s):  
Technical Efficiency ◽  
Stochastic Frontier Analysis ◽  
Net Primary Productivity ◽  
Stochastic Frontier ◽  
Production Capacity ◽  
Livestock Grazing ◽  
Production Level ◽  
Frontier Analysis ◽  
Average Value ◽  
Livestock Husbandry

Recently, improving technical efficiency is an effective way to enhance the quality of grass-based livestock husbandry production and promote an increase in the income of herdsmen, especially in the background of a continuing intensification of climate change processes. This paper, based on the survey data, constructs a stochastic frontier analysis (SFA) model, incorporates net primary productivity (NPP) into the production function as an ecological variable, refines it to the herdsman scale to investigate grassland quality and production capacity, and quantitatively evaluates the technical efficiency of grass-based livestock husbandry and identifies the key influencing factors. The results show that the maximum value of technical efficiency was up to 0.90, and the average value was around 0.53; the herdsmen’s production gap was large and the overall level was relatively low. Additionally, the lack of forage caused by drought was the key factor restricting the current grass-based livestock husbandry production level, and the herdsmen’s adaptive measures, mainly represented as “purchasing forage” and “selling livestock”, had a positive significance for improving technical efficiency. Based on this, expanding the planting area of artificial grassland, improving the efficiency of resource utilization, and enhancing the supply capacity of livestock products while ensuring the ecological security of grassland are effective ways to increase the production level of grass-based livestock husbandry in Hulun Buir.

scholarly journals Productivity of Nations: A Stochastic Frontier Approach to TFP Decomposition

2012 ◽  
Vol 2012 ◽  
pp. 1-19 ◽  
Author(s):  
Jorge Oliveira Pires ◽  
Fernando Garcia
Keyword(s):  
Technical Change ◽  
Stochastic Frontier Analysis ◽  
Scale Effects ◽  
Stochastic Frontier ◽  
Allocative Efficiency ◽  
Developing Nations ◽  
Production Frontier ◽  
Stochastic Frontier Approach ◽  
Frontier Analysis ◽  
Long Period

This paper tackles the problem of aggregate TFP measurement using stochastic frontier analysis. We estimate a world production frontier for a sample of 75 countries over a long period. The “Bauer-Kumbhakar” decomposition of TFP is applied to a smaller sample in order to evaluate the effects of changes in efficiency (technical and allocative), scale effects, and technical change. Estimated technical efficiency scores are compared to productivity indexes offered by nonfrontier studies. We conclude that differences in productivity are responsible for virtually all the differences of growth performance between developed and developing nations and that a large part of this is due to allocative efficiency.

scholarly journals Ownership Structure and Efficiency of Banking Industry in China and Vietnam - A Political View

2018 ◽  
Vol 9 (3) ◽  
pp. 61 ◽  
Author(s):  
Manh-Trung Phung ◽  
Cheng-Ping Cheng ◽  
Chen-Yu Kao
Keyword(s):  
Financial Institutions ◽  
Ownership Structure ◽  
Stochastic Frontier Analysis ◽  
Banking Industry ◽  
Stochastic Frontier ◽  
Two Stage ◽  
Interesting Phenomenon ◽  
Political Factors ◽  
Frontier Analysis ◽  
Political View

Ownership structure and the performance of banking industry have been long considered as a matter of debate. Despite of differences in perspective, both “development view” and “politics view” approve the desire of governments to control financial institutions through their ownership structure. This paper adopts the two-stage stochastic frontier analysis (SFA) to examine the relation between ownership structure and bank’s efficiency in two long historic communism countries – China and Vietnam with the consideration of some political factors. Our result consistently indicates that banks with foreign-controlled shareholders in both countries can increase their efficiency significantly. Additionally, we uncover an interesting phenomenon that is during the election years, state-owned banks in China and Vietnam outperform the others. These banks are also the most beneficiaries from the economic expansion. Finally, meta-frontier is utilized to compare the relative performance of banking industry in these two countries.

Banks’ stability-efficiency within dual banking system: a stochastic frontier analysis

2015 ◽  
Vol 8 (4) ◽  
pp. 472-490 ◽  
Author(s):  
Salma Louati ◽  
Younes Boujelbene
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Banking System ◽  
Content Type ◽  
Frontier Analysis ◽  
Explanatory Variables ◽  
Banking Stability ◽  
Conventional Banks

Purpose – The purpose of this paper is to examine and compare the market power and the efficiency-stability of Islamic and conventional banks in the MENA zone and South East Asia during the 2005-2012 period. Design/methodology/approach – The author applied an empirical approach in two steps. First, the author estimates the Lerner indicator, which is a measure of competition. Then, this measure is regressed and other explanatory variables on the banking “stability-efficiency” are derived simultaneously from the estimation of a stability stochastic frontier. Findings – The author concludes that increased competition in the Islamic banking sector promotes the overall banking stability. Besides, whether there is a low or high competitiveness, the size of an Islamic bank is positively related to financial stability. However, large conventional banks operating in market with limited competitiveness become more involved in the risk behavior. The author concludes that capitalization has a positive effect on stability only in case of low competitiveness. Originality/value – The originality of this research lies in the application of the stochastic frontier approach (SFA) on the Z-score indicator. This methodology enables to take into account the differences between the current and the optimum stability that each bank can achieve, thus creating a new measure of financial stability called “efficiency-stability”.

scholarly journals Evaluating Bank Cost Efficiency Using Stochastic Frontier Analysis

2019 ◽  
Vol 11 (3(J)) ◽  
pp. 48-57
Author(s):  
Sanderson Abel ◽  
Alex Bara ◽  
Pierre Le Roux
Keyword(s):  
Interest Rates ◽  
Cost Efficiency ◽  
Commercial Banks ◽  
Banking Sector ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Banking System ◽  
Frontier Analysis ◽  
Doing Business ◽  
The Cost

The study seeks to assess the cost efficiency of the commercial banks in Zimbabwe using the stochastic frontier analysis. The cost efficiency of the Zimbabwean banks is estimated using the trans-log stochastic frontier approach. The Stochastic Frontier Analysis methodology is among the host of methods that has been used to measure banking sector efficiency. The analysis of cost efficiency of commercial banks has important implications for the economy since an efficient banking system has potential to reduce interest rates which can lead to increased investment and growth for the economy. The cost of doing business in Zimbabwe is perceived to be high hence improved bank efficiency has the potential to reduce the cost of doing business. The average cost efficiency scores for the Zimbabwean banks over the study period show that the banking sector in Zimbabwe experiencing 17 percent inefficiency. The efficiency levels have been declining over the years reflecting increased resource wastage in the system. The study recommends that the banking institutions should continue to innovate so as to reduce their inefficiencies.

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