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Ownership and efficiency in Malaysian banking


Abd Karim, Mohd Zaini (2003) Ownership and efficiency in Malaysian banking. Philippine Review of Economics, 40 (2). pp. 91-101. ISSN 1655-1516

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Abstract

Changes in the ownership structure have been an important feature of the evolution of the Malaysian banking sector. In 1986, the Banking Act of 1973 was amended to limit equity ownership by individual companies in a bank to 20 percent, and by a family-owned company or an individual person to 10 percent. This paper analyzes whether ownership structure has any effect on bank efficiency in Malaysia. Cost efficiency is estimated using the Stochastic cost frontier approach. Tobit regression analysis is then employed to determine the effect of ownership variables on bank efficiency. The results indicate that first, state-owned banks and local banks are less efficient than privately owned banks and foreign banks, respectively. Second, we find a positive correlation between ownership concentration and firm’s performance suggesting that large investors, to some extent, have the incentive as well as the power to monitor and control the behavior of management, and thus assume a significant role in corporate governance.

Item Type: Article
Uncontrolled Keywords: Bank efficiency, stochastic cost frontier, Tobit regression
Subjects: H Social Sciences > HG Finance
Divisions: College of Arts and Sciences
Depositing User: Prof. Dr. Mohd Zaini Abd Karim
Date Deposited: 28 Nov 2010 06:45
Last Modified: 28 Nov 2010 06:45
URI: http://repo.uum.edu.my/id/eprint/1591

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