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Leigh M. Drake
Leigh M.
Drake
Maximilian Hall
Maximilian
Hall
Richard Simper
Richard
Simper
The impact of macroeconomic and regulatory factors on bank efficiency: a non-parametic analysis of Hong Kong's financial services sector
Loughborough University
2005
Data envelopment analysis
Slack adjustments
Hong Kong banks
Efficiency
Regulation
Environmental variables
Economics not elsewhere classified
2005-08-12 12:53:57
Preprint
https://repository.lboro.ac.uk/articles/preprint/The_impact_of_macroeconomic_and_regulatory_factors_on_bank_efficiency_a_non-parametic_analysis_of_Hong_Kong_s_financial_services_sector/9492545
This paper assesses the relative technical efficiency of institutions operating in a market that has been significantly affected by environmental and market factors in recent years, the Hong Kong banking sector. These environmental factors are specifically incorporated into the efficiency analysis using the innovative slacks-based, second stage Tobit regression approach advocated by Fried et al (1999). A further innovation is that we also employ Tone’s (2001) slacks-based model (SBM) to conduct the Data Envelopment Analysis (DEA), in addition to the more traditional approach attributable to Banker, Charnes and Cooper (BCC) (1984).
The results indicate that both adjustments can have a significant impact on relative efficiency measures, ranks and trends, which is an important issue if such relative efficiency measures are to be used in policy analysis. The results also indicate: high levels of technical inefficiency for many institutions; considerable variations in efficiency levels and trends across size groups and financial sectors; and also differential impacts of environmental factors on different size groups and financial sectors.