The nexus between financial sector consolidation, competition and efficiency: empirical evidence from the Malaysian banking sector

Sufian, Fadzlan (2011) The nexus between financial sector consolidation, competition and efficiency: empirical evidence from the Malaysian banking sector. IMA Journal of Management Mathematics, 22 (4). pp. 419-444. ISSN 1471-678X

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Abstract

By employing data on 337 bank-year observations, the paper examines the impact of consolidation on efficiency and competition in the Malaysian banking sector during 1996–2008. We employ the Panzar-Rosse (P-R) H-statistic method to evaluate the degree of competition, while Data Envelopment Analysis (DEA) is employed to compute the efficiency of individual banks. The empirical findings from the DEA suggest that the Malaysian banking sector has been relatively inefficient in their intermediation function during the post-merger period. On the other hand, we find that the Malaysian banking sector has been relatively more efficient during the post-merger period under the revenue approach. The test of market contestability by using the P-R method seems to reject both monopoly and perfect market competition conditions indicating monopolistic market behaviours among banks operating in the Malaysian banking sector.

Item Type:	Article (Journal)
Additional Information:	6678/5195
Uncontrolled Keywords:	Banks, Competition, Efficiency, Panzar-Rosse, Data envelopment analysis, Malaysia
Subjects:	H Social Sciences > HG Finance > HG1501 Banking
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Institute of Islamic Banking & Finance (IIiBF)
Depositing User:	Dr. Fadzlan Sufian
Date Deposited:	02 Nov 2011 16:33
Last Modified:	28 Jun 2013 10:42
URI:	http://irep.iium.edu.my/id/eprint/5195

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