Efficiency and total factor productivity changes of Malaysian commercial banks

Mariani Abdul-Majid, David Saal, Giuliana Battisti

Research output: Contribution to journalArticlepeer-review


This paper analyses the efficiency of Malaysian commercial banks between 1996 and 2002 and finds that while the East Asian financial crisis caused a short-term increase in efficiency in 1998 primarily due to cost-cutting, increases in non-performing loans after the crisis caused a more sustained decline in bank efficiency. It is also found that mergers, fully Islamic banks, and conventional banks operating Islamic banking windows are all associated with lower efficiency. The paper estimates suggest mild decreasing returns to scale, and an average productivity change of 2.37% that is primarily attributable to technical change, which has nonetheless declined over time. Finally, while Islamic banks have been moderately successful in developing new products and technologies, the results suggest that the potential for Islamic banks to overcome their relative inefficiency is limited.
Original languageEnglish
Pages (from-to)2117-2143
Number of pages27
JournalService Industries Journal
Issue number13
Early online date28 Sept 2010
Publication statusPublished - Oct 2011


  • Malaysian banking
  • bank efficiency
  • bank productivity
  • Islamic banking


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