Total Factor Productivity of Thai Banks in 2007-2010: An Application of DEA and Malmquist Index

Journal of Applied Finance and Banking, Vol. 2, No. 5, pp. 27-42, 2012

16 Pages Posted: 21 Oct 2012

See all articles by Thanh Ngo

Thanh Ngo

Massey University - School of Aviation

Linh Thi Phuong Nguyen

Asia-Pacific International University

Date Written: October 15, 2012

Abstract

This research employs the Data Envelopment Analysis (DEA) and Malmquist index approaches to evaluate the efficiency and Total Factor Productivity (TFP) changes of Thai banking system in the period of 2007-2010 using panel data of 27 major banks in Thailand. This paper shows that the global crisis had a late effect on Thai banks as the TFP only dropped in 2010. While the local banks maintained their stable, foreign banks were more fluctuating – some improved their TFPs, some did not and become worst performers in the system. The reason behind it may relate to the fact that Thai banking system is currently running at decreasing returns to scale situation, which proposes that Thai banks are wasting resources in over-expansion. Hence, continuing to develop and restructuring the banking system is an emergence task for Thailand in the near future.

Keywords: Thai banking system, efficiency, data envelopment analysis, Malmquist index, Global financial crisis

JEL Classification: E50, G21, G28

Suggested Citation

Ngo, Thanh and Nguyen, Linh Thi Phuong, Total Factor Productivity of Thai Banks in 2007-2010: An Application of DEA and Malmquist Index (October 15, 2012). Journal of Applied Finance and Banking, Vol. 2, No. 5, pp. 27-42, 2012, Available at SSRN: https://ssrn.com/abstract=2164838

Thanh Ngo

Massey University - School of Aviation ( email )

United States

Linh Thi Phuong Nguyen (Contact Author)

Asia-Pacific International University ( email )

PO Box 4
Muak Lek, Saraburi 18180
Thailand

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