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Title: Evaluating Kuala Lumpur stock exchange oriented bank performance with stochastic frontiers

Banks play an essential role in the economic development and banks need to be efficient; otherwise, they may create blockage in the process of development in any country. The efficiency of banks in Malaysia is important and should receive greater attention. This study formulated an appropriate stochastic frontier model to investigate the efficiency of banks which are traded on Kuala Lumpur Stock Exchange (KLSE) market during the period 2005–2009. All data were analyzed to obtain the maximum likelihood method to estimate the parameters of stochastic production. Unlike the earlier studies which use balance sheet and income statements data, this study used market data as the input and output variables. It was observed that banks listed in KLSE exhibited a commendable overall efficiency level of 96.2% during 2005–2009 hence suggesting minimal input waste of 3.8%. Among the banks, the COMS (Cimb Group Holdings) bank is found to be highly efficient with a score of 0.9715 and BIMB (Bimb Holdings) bank is noted to have the lowest efficiency with a score of 0.9582. The results also show that Cobb-Douglas stochastic frontier model with truncated normal distributional assumption is preferable than Translog stochastic frontier model.
Authors:
; ; ;  [1]
  1. School of Quantitative Sciences, Universiti Utara Malaysia 06010, Sintok, Kedah (Malaysia)
Publication Date:
OSTI Identifier:
22390751
Resource Type:
Journal Article
Resource Relation:
Journal Name: AIP Conference Proceedings; Journal Volume: 1635; Journal Issue: 1; Conference: ICOQSIA 2014: 3. International Conference on Quantitative Sciences and Its Applications, Langkawi, Kedah (Malaysia), 12-14 Aug 2014; Other Information: (c) 2014 AIP Publishing LLC; Country of input: International Atomic Energy Agency (IAEA)
Country of Publication:
United States
Language:
English
Subject:
71 CLASSICAL AND QUANTUM MECHANICS, GENERAL PHYSICS; BALANCES; COMMERCIAL BUILDINGS; ECONOMIC DEVELOPMENT; EFFICIENCY; INCOME; MALAYSIA; MARKET; MAXIMUM-LIKELIHOOD FIT; PERFORMANCE; STOCHASTIC PROCESSES; TRADE