Trends in the efficiency of Singapore's commercial banking groups

Fadzlan Sufian

97 citations0/0 files storedInternational Journal of Productivity and Performance Management

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Efficiency Analysis Using DEA Banking stability, regulation, efficiency Banking Sector Performance and Management

Abstract

Purpose The purpose of this paper is to examine the long‐term trend in the efficiency of the Singapore banking sector. Design/methodology/approach The paper utilises the data envelopment analysis (DEA) window analysis methodology, which allows us to distinguish between three different types of efficiency namely, technical, pure technical and scale efficiencies. Given that the sample population is small, the DEA window analysis allows for a greater degree of freedom to the sample. The paper further examines whether the Singapore banking groups were drawn from the same environment during two sub‐periods by performing a series of parametric and non‐parametric tests. Finally, the paper attempts to investigate the consistency of the estimated DEA efficiency scores by examining its relationship with the traditional measures of banks’ performance. Findings During the period of study, the results suggest that the Singapore banking groups have exhibited mean overall or technical efficiency of 88.4 per cent. It was found that the Singapore banking groups’ overall efficiency was on a declining trend during the earlier part of the studies, before increasing dramatically during the later period. Research limitations/implications The paper could be extended to consider the production approach along with the intermediation approach, which has been applied in this paper. Investigation of changes in productivity over time as a result of technical change or technological progress or regress by employing the Malmquist Total Factor Productivity Index, could be another extension to the paper. Originality/value This paper provides new empirical evidence on the long‐term trends in the efficiency of the Singapore banking groups.

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References

1978Measuring the efficiency of decision making units 1984Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis 1957The Measurement of Productive Efficiency 2005An Introduction to Efficiency and Productivity Analysis 1998An Introduction to Efficiency and Productivity Analysis 1999Data Envelopment Analysis: A Comprehensive Text with Models, Applications, References and DEA-Solver Software 1997Efficiency of financial institutions: International survey and directions for future research 1977INPUTS, OUTPUTS, AND A THEORY OF PRODUCTION AND COST AT DEPOSITORY FINANCIAL INSTITUTIONS

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