economies

Article
Determinants of Sino-ASEAN Banking Efficiency:
How Do Countries Differ?
Hasanul Banna 1,2, * , Syed Karim Bux Shah 3 , Abu Hanifa Md Noman 4,5 , Rubi Ahmad 4 and
Muhammad Mehedi Masud 6
1 Ungku Aziz Centre for Development Studies, Faculty of Economics and Administration,
University of Malaya, 50603 Kuala Lumpur, Malaysia
2 Putra Business School, University Putra Malaysia (UPM), 43400 Serdang, Selangor, Malaysia
3 Institute of Business Administration, University of Sindh, Jamshoro 76080, Pakistan;
[email protected]
4 Department of Finance and Banking, Faculty of Business and Accountancy, University of Malaya,
50603 Kuala Lumpur, Malaysia; [email protected] (A.H.M.N.); [email protected] (R.A.)
5 Department of Business Administration, Faculty of Business Studies, International Islamic University
Chittagong, 4318 Kumira, Bangladesh
6 Department of Development Studies, Faculty of Economics and Administration, University of Malaya,
50603 Kuala Lumpur, Malaysia; [email protected]
* Correspondence: [email protected] or [email protected]; Tel.: +6-03-7967-3602




Received: 12 September 2018; Accepted: 30 January 2019; Published: 20 February 2019


Abstract: The purpose of this paper is to assess the importance of geographical location in the banking
sector efficiency of the Sino-ASEAN (Association of Southeast Asian Nations) region, and how the
location was affected before, during and after the financial crisis. Using a panel of data from 407 banks
from China, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam from 2000–2013,
this study applies data envelopment analysis, Tobit regression, bootstrapping, and Simar and Wilson
double bootstrapping regression. The empirical evidence suggests that the banking market has an
important and significant role in the efficiency of the banking sector in the Sino-ASEAN region.
The significant country’s coefficients suggest that during the pre-crisis period, banks belonging to
China and Indonesia were more likely to be efficient due to the geographical location effect. The study
finds the same tendency among Chinese banks in the crisis period as in the period before the crisis.
Overall, the results suggest that Chinese banks outperform banks from the ASEAN countries in terms
of efficiency. This study raises some significant policy implications for improving bank efficiency.

Keywords: Efficiency; DEA; China; ASEAN; banking; financial crisis; geographical location

JEL Classification: G01; G21

1. Introduction
The banking sectors of the East Asian countries are homogenous for at least three reasons: Firstly,
the commercial banks are predominant sources of financial assets, holding more than 80 percent
of the region’s financial assets (Chan et al. 2015). Secondly, the governments promote banking
sector consolidation in the region through mergers/acquisitions to boost banking sector stability
(Soedarmono et al. 2013). Thirdly, the countries have liberalized their entry barriers for regional banks
to promote regional banking integration through the adoption of regional integration frameworks,
such as the Association of Southeast Asian Nations (ASEAN) Banking Integration Framework (ABIF)
in March 2015, the ASEAN-China Free Trade Area (FTA) in January 2010 and the ASEAN Plus Three
cooperation in December 1997. The ASEAN Plus Three cooperation includes China, Japan and South

Economies 2019, 7, 13; doi:10.3390/economies7010013 www.mdpi.com/journal/economies

Economies 2019, 7, 13 2 of 23

Korea (Chan et al. 2015; Noman et al. 2018). The banking sector liberalization and regional banking
integration frameworks were initiated in order to promote competition and encourage banks to
increase their operational efficiency (Noman et al. 2017). In a competitive market, banks need to be
efficient in order to enjoy competitive advantages over inefficient banks (Schaeck and Cihák 2014).
In addition, Kwack (2000) and Molyneux et al. (2013) indicated that operational inefficiency was among
the leading causes of bank failure during the Asian Financial Crisis (AFC) and the global financial
crisis (GFC). Consequently, the determination of East Asian banks’ operational efficiency has gained
considerable attention from academics and policy-makers. Additionally, the GFC in both advanced and
transition economies and the associated fiscal cost of crisis resolution (Honohan and Klingebiel 2003)
has generated a new wave of interest among researchers to re-examine bank efficiency.
Bank efficiency has already gained a considerable amount attention in banking literature,
however, most studies focus on the United States and other developed Western countries (such
as Athanasoglou et al. 2008; Fries and Taci 2005; Heffernan and Fu 2010; Nurboja and Košak 2017;
Qin and Pastory 2012, among others). In recent years, several studies have been undertaken on different
issues relating to the efficiency of East Asian banks, but most of them have been focused on a single country.
Dacanay (2007) and Manlagñit (2011) in the Philippines, Sufian (2009) in Malaysia and Margono et al. (2010)
in Indonesia focused on the effect of the AFC on bank efficiency. Another group of studies by
Berger et al. (2009) in China, Parinduri and Riyanto (2014), Margono et al. (2010), Hadad et al. (2011a)
and Hadad et al. (2011b) in Indonesia, Matthews and Ismail (2006) in Malaysia, and Vu and Nahm (2013)
in Vietnam focused on the effect of ownership structure on efficiency. Zhang and Matthews (2012) focused
on post-AFC efficiency convergence in Indonesia, and Chen et al. (2005) investigated the effect of Chinese
banking reform on efficiency, while Dong et al. (2014) estimated cost efficiency in China. In addition,
Sufian and Habibullah (2009) investigated the effect of mergers and acquisitions on the efficiency of banks
in Malaysia. In another study, Sufian and Habibullah (2010) investigated the determinants of efficiency in
banks in Thailand.
Cross-country bank efficiency studies in East Asian countries are still scarce in the literature.
Abd Karim (2001) made the first attempt in determining the bank efficiency of four East Asian countries:
Indonesia, Malaysia, the Philippines and Thailand. In another study, Williams and Nguyen (2005)
investigated financial liberalization and profit efficiency in AFC-affected countries, such as Indonesia,
Malaysia, the Republic of Korea and the Philippines. In addition, Thoraneenitiyan and Avkiran (2009)
investigated the role of consolidation and liberalization on efficiency in Indonesia, Malaysia, the Philippines,
Thailand and Korea, while Sufian (2010) investigated the effect of the AFC on technical efficiency in
Malaysia and Thailand. Most recently, Chan et al. (2015) investigated the effect of market structure and
institutional quality on efficiency in Indonesia, Malaysia, the Philippines, Singapore and Thailand.
The present study aims to determine the efficiency of banks and the determinants of said efficiency
across East Asian countries, especially ASEAN-61 countries and China (hereafter Sino-ASEAN). This is
due to the fact that the cross-country comparison of bank efficiency enables us to answer fundamentally
essential research questions, such as: Do countries differ in terms of their banking efficiency? This
study goes beyond the scope of previous cross-country studies in East Asia, incorporating China into the
cross-country study. The findings of this study would be interesting for investors and policymakers in the
region, particularly in the context of the full execution of the ASEAN-China FTA and the ASEAN Plus
Three cooperation. In addition, cross-country efficiency information in the region is crucial for regional
banks in order to move across the region by establishing foreign branches in other countries within the
region. The ASEAN banking integration framework, the ASEAN-China FTA and the ASEAN Plus Three
cooperation will intensify both regional banking integration and banking market competition in the region.
The Asian Development Bank (ADB, ASEAN 2013) identified that diversity is the main characteristic of
East Asian banks which is different in the form of the size of economy, industrial structure and stage of

1 Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

Economies 2019, 7, 13 3 of 23

economic development. Economic diversity may influence large regional banks from relatively developed
countries with comparatively low profit margins to move to comparatively less developed countries with
a relatively high profit margin (Noman et al. 2017). This study further estimates the effect of the GFC on
the efficiency of commercial banks in China and ASEAN countries. This is important to identify whether a
given bank suffered from the GFC due to inefficiencies in the region.
This study contributes to banking literature in a number of ways. The study enhances the literature
on estimating and comparing the technical efficiency of Sino-ASEAN banks, especially during the GFC
period. Firstly, this study estimates the efficiency of Sino-ASEAN countries using a non-parametric
data envelopment analysis (DEA) approach. Secondly, it uses second step analysis by estimating
the bank specific and country specific determinants on bank efficiency using Tobit regression and
Simar and Wilson (2007) double bootstrapping regression. Thirdly, it incorporates the geographical
location effect to investigate the role of location on efficiency in the region. Fourthly, it examines the
effect of the GFC on efficiency. The study finds that Chinese banks dominate the Sino-ASEAN efficiency
frontier regardless of the period, suggesting that Chinese banks outperform ASEAN countries’ banks
in terms of efficiency, though the efficiency of Chinese banks has sharply declined over the GFC period.
Our results also support the hypothesis that location or the banking market has an important and
significant role in explaining banking sector efficiency in the Sino-ASEAN region. The significantly
positive location coefficients in our model suggest that during the pre-crisis period, banks belonging to
China and Indonesia were more likely to be efficient due to the location effect. We found the same
tendency among Chinese banks in the crisis period as in the period before the crisis.
The rest of the paper comprises the following sections: Section 2 discusses the data and
methods, Section 3 presents the results and discussion, and the final section deals with our conclusion
and recommendation.

2. Methodology

2.1. Data and Variables

In the present international setting, the need for comparable data from different countries imposes
substantial restrictions on the type of variables one is able to use, not least because of the various
accounting criteria used in the seven countries under investigation. To minimize any possible bias
arising from different accounting practices, broad variable definitions have been chosen, as presented
by Orbis Bank Focus (OBF), formerly known as Bankscope. The data of bank-specific variables from
a sample of 716 banks from Sino-ASEAN countries (total active banks for these seven countries,
where six countries were from the ASEAN) was extracted from the OBF database. The data for the
macroeconomic variables was extracted from the World Bank (2014) database. Table 1 shows the
variable definition used in our analysis, both in DEA, Tobit regression, bootstrapping Tobit and the
Simar and Wilson (2007) double bootstrapped procedure. We selected China and the above six ASEAN
countries based on their contribution to the entire ASEAN banking industry (based on total assets) and
the availability of data. In order to maintain consistency across countries, only commercial banks were
included in the analysis. The result is a panel sample of 407 banks with 2870 bank-year observations.
The data were extracted from the nonconsolidated income statement and balance sheet data for the
years 2000–2013. The percentage of the total number of banks for each country in the sample is
summarized in Table 2. Tables 3 and 4 show the descriptive statistics of the variables used in the DEA
estimation and regression analysis. All data are reported in USD (million). We split the period into
three parts: 2000–2006 as the pre-global financial crisis period, 2007–2009 as the global financial crisis
period and 2010–2013 as the post-financial crisis period. We did this in order to show the impact of the
GFC on Sino-ASEAN banking industry efficiency. For banks with missing information, we have looked
at the individual bank’s websites to determine the appropriate classification. Finally, we calculated
the efficiency score year by year and we obtained different observations in different years, which are
mentioned in Table 5.
Economies 2019, 7, 13 4 of 23

Table 1. Definition of variables.

Variables Definition Data Source
Panel A: Input-Output Variables
Interest expenses Bank’s interest expense at the end of the year Orbis Bank Focus (OBF)
Non-interest expenses Bank’s non-interest expense at the end of the year OBF
Personnel expenses Bank’s personnel expense at the end of the year OBF
Deposits Bank’s deposit at the end of the year OBF
Loans Bank’s loans at the end of the year OBF
Liquid assets Bank’s liquid assets at the end of the year OBF
Other earning assets Bank’s other earning assets at the end of the year OBF
Panel B: Variables Used in Regression
Bank efficiency Data envelopment analysis (DEA) input-oriented variable return to scale score DEA estimation
Total assets Bank’s total assets at the end of the year OBF
Bank size The natural logarithm of bank’s total assets Own calculation
Return on average assets (ROAA) Bank’s return on average assets at the end of the year in percentage OBF
Capital adequacy ratio (CAR) Bank’s total equity to total assets at the end of the year in percentage OBF
Net Interest margin (NIM) Bank’s net interest margin at the end of the year in percentage OBF
GDP growth Gross domestic product (GDP) growth of the country at the end of the year in percentage World Bank database
Inflation rate Inflation rate of the country at the end of the year in percentage (Consumer prices) World Bank database
Real interest rate Real interest rate of the country at the end of the year in percentage World Bank database

Table 2. Total number of banks for each country in the sample.

Country Number of Banks Percentage

China 169 41.52
Indonesia 69 16.95
Malaysia 34 8.35
Philippines 44 10.81
Singapore 20 4.91
Thailand 23 5.65
Vietnam 48 11.79
Total 407 100

Table 3. Descriptive statistics of input and output variables used in data envelopment analysis
(DEA) estimation.

Input-Output Variable’s Descriptive Statistics (Country Wise, Millions USD)

Input
Country Obs. Interest Expenses Non-Interest Expenses Personnel Expenses Deposits
Mean SD Mean SD Mean SD Mean SD
China 1040 1653.87 5501.74 877.54 3141.93 464.54 1800.26 78,598.17 278,448.20
Indonesia 657 170.23 327.73 133.68 284.84 63.22 138.53 3334.25 7199.38
Malaysia 270 196.22 370.53 133.19 290.80 72.21 172.39 8552.92 17,761.61
Philippines 214 90.35 108.45 145.69 196.00 55.63 79.93 3936.11 5611.68
Singapore 112 511.46 822.03 498.14 798.26 263.13 426.12 35,049.76 58,726.01
Thailand 243 289.06 313.59 318.67 367.83 134.72 169.30 12,683.09 14,689.56
Vietnam 334 192.63 346.06 58.40 115.07 26.91 66.50 2834.28 4704.90
All 2870 730.32 3396.91 425.21 1940.69 218.56 1108.02 33,114.47 171,732.40
Output
Country Obs. Loans Liquid Assets Other Earning Assets
Mean SD Mean SD Mean SD
China 1040 48,029.29 167,162.80 17,262.27 53,159.06 33,838.23 113,313.30
Indonesia 657 2182.01 4894.53 979.17 2068.89 1487.23 3352.61
Malaysia 270 6109.30 13,835.53 2433.97 3800.20 2675.53 5565.31
Philippines 214 2071.67 3322.00 1170.95 1713.31 2215.81 2958.32
Singapore 112 24,059.95 42,799.21 9504.42 14,579.68 17,651.27 28,454.28
Thailand 243 10,405.76 11,975.90 2158.42 2823.07 4029.21 5179.20
Vietnam 334 1855.47 3698.95 815.33 1117.18 1095.13 1486.64
All 2870 20,668.96 103,316.80 7444.30 33,052.04 14,176.75 70,136.62
Obs. = observation, SD = standard deviation.
Economies 2019, 7, 13 5 of 23

Table 4. Descriptive statistics of the variables used in regression.

Variable Observations Mean Std. Dev. Median 25% 75%

Bank efficiency 0.637 0.268 0.630 0.399 0.900
Total assets (mill USD) 39,397.330 196,885.100 3368.169 845.261 12,016.380
Bank size (log total assets) 8.110 2.085 8.122 6.740 9.394
Return on average assets 1.130 2.999 1.117 0.622 1.564
Capital adequacy ratio 2870 12.470 11.852 9.086 6.343 14.057
Net interest margin (%) 3.751 2.981 3.265 2.414 4.421
GDP growth (%) 6.956 2.902 6.486 5.318 9.112
Inflation rate (%) 4.775 3.855 4.219 2.631 6.244
Real interest rate (%) 2.691 3.330 3.310 −0.156 4.592

Table 5. Country- and year-wise contribution of efficient banks in the Sino-ASEAN frontier (in %).

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
China 24 60 59 51 50 53 61 75 64 74 62 69 63 60
Indonesia 24 20 13 15 16 3 0 3 0 0 0 3 5 2
Malaysia 17 5 16 12 16 8 7 8 12 6 13 13 10 9
Philippines 0 5 0 0 6 3 2 0 2 0 2 0 3 2
Singapore 7 5 3 5 6 18 15 10 12 11 15 8 13 13
Thailand 14 0 6 10 0 13 2 3 7 0 2 3 0 0
Vietnam 14 5 3 7 6 5 12 3 2 9 6 5 8 13
All 100 100 100 100 100 100 100 100 100 100 100 100 100 100

2.2. Methods
Following Banna et al. (2017), this study uses an input-oriented (cost minimization) approach of
data envelopment analysis (DEA) to measure efficiency. In input-orientated models, the DEA method is
used to classify technical inefficiency as a relative decline in input usage as well as to quantity technical
inefficiency as a proportional increase in output or production. These two measures provide the same
value under a constant return scale (CRS), but different values under a variable return scale (VRS).
This has both theoretical and practical implications, for example, in businesses where the importance
is placed on cost-control, the choice would be an input orientation (Ferrier and Valdmanis 1996).
Besides, the choice of a VRS over a CRS is justified, such that all banks are not operating at an optimal
scale due to imperfect competition and financial constraints (Barry et al. 2010).
A few issues have been raised by researchers while using non-parametric methods.
However, the “two-step procedure” developed by Grosskopf (1996) and Lovell et al. (1995) is used
to overcome this problem. This approach treats the efficiency score as regressand and the regression
explains the variation of these efficiency scores. Casu and Molyneux (2003) argued that two-stage analysis
is important, because in the first stage, only traditional inputs and outputs are involved, while in the
second stage one can easily evaluate the direction, influence and strength of the relationship. They also
claimed that a Tobit regression model (Tobin 1958) could be used, as it can explain the truncated data.
Another issue with using non-parametric methods is the dependency problem. The dependency
problem exists because the DEA efficiency score is a relative and not absolute efficiency index
(Xue and Harker 1999). To overcome this problem, the bootstrap method that was introduced by
Efron (1979) is used. The advantages of the bootstrap method are that it gives an empirical distribution of
efficiency scores for each observation in the sample (Atkinson and Wilson 1995) and that it evaluates the
sensitivity of efficiency scores to the sampling deviations of the estimated frontier (Simar and Wilson 1998).
Although, we used bootstrapping Tobit regression in this study to minimize biased estimation
and misspecification in the second stage. However, Simar and Wilson (2011) and Daraio et al. (2018)
criticized the use of Tobit regression in the second stage, as it produces biased estimates and
miss-specification. They argued that, in Tobit regression, explanatory variables are correlated with
the disturbance term, hence the regression assumption of the disturbance term is independent
of the explanatory variables and becomes invalid (separability issue). In this study, we also
used a Simar and Wilson (2007) double bootstrap approach for the robustness of the study.
Economies 2019, 7, 13 6 of 23

The double bootstrap approach, in particular, helps to limit the problems arising both from the
endogeneity of outreach measures, with respect to the efficiency of microfinance institutions (MFIs),
and from the autocorrelation of the non-observable components of efficiency (Mia et al. 2018).
This two-stage approach constitutes a methodological cornerstone in the literature for identifying
the determinants of efficiency of financial institutions (Fukuyama and Matousek 2011). While using
the Simar and Wilson (2007) bootstrapped procedure, we assumed that the “separability” assumption
holds in the analysis.

2.3. Input and Output Selection

Although there is no inclusive theory for the banking firm and no agreement on the explicit
definition and measurement of banks’ inputs and outputs, Berger and Humphrey (1997) explained that
an “intermediation approach” may be more suitable for assessing entire financial institutions, because
of the inclusion of interest expenses, which typically account for one-half to two-thirds of total costs.
Besides, the intermediation approach may be appropriate for assessing the significance of frontier
efficiency to the profitability of financial institutions, since the minimization of total costs such as
interest expenses, non-interest expenses and personnel expenses, not just production costs, is required
to maximize profits. Following the previous studies (Banna et al. 2017; Casu and Molyneux 2003),
the intermediation approach is used in financial institutions as intermediaries between the supply and
demand of funds. The critical significance of the intermediation approach is to consider deposits as
inputs and interest on deposits as an element of total costs. Therefore, we considered interest expenses,
non-interest expenses, personnel expenses and deposits as inputs, whereas total loans, liquid assets
and other earning assets were considered as outputs.

2.4. Empirical Model Specification

To calculate the efficiency score, this study used a two-step DEA approach, as proposed by
Coelli et al. (1998) using the DEAP version 2.1 computer programming software to estimate the
efficiency score2 . The mathematical specification of the DEA-VRS input-oriented model is as follows:
Min θ
Such that:
n
∑ ϕ j Aij ≤ θ Ai0 ; i = 1, 2, . . . ..x
j =1
n
∑ ϕ j Bqj ≤ Bq0 ; q = 1, 2, . . . ..y
j =1 (1)
n
∑ ϕj = 1
j =1
ϕ j ≥ 0; j ∈ 1, 2 . . . m
where θ is the efficiency score, Aij and Bqj are the amount of the ith input consumed and the amount of the
qth output generated by the jth bank, respectively. The index m refers to the number of bank observations,
x equals the four inputs (interest expenses, non-interest expenses, personnel expenses and deposits) and y
refers to the three outputs (total loans, liquid assets and other earning assets) and ϕ is constant.
Furthermore, in order to examine the determinants of Sino-ASEAN bank efficiency, we used the
efficiency measures derived from the DEA estimations as the dependent variable using STATA version
15. We then estimated the following censored Tobit regression model for each of the sample countries.

θijt = γ0 + γ1 SIZEijt + γ2 ROAAijt + γ3 CARijt + γ4 N I Mijt + γ5 GDPjt + γ6 IFjt

(2)
+γ7 RIjt + γ8 DumCONi + ε ijt

2 We estimated numerous variations of Equation (1), including more and less aggregated inputs, combining the output
measures and dropping individual inputs. The inferences of the study remain unchanged across the different
DEA specifications.
Economies 2019, 7, 13 7 of 23

where:

θijt = DEA efficiency score of the bank i of country j in year t;

SIZEijt = The natural logarithm of total assets of the bank i of country j in year t;
ROAAijt = Return on average assets of the bank i of country j in year t;
CARijt = Capital adequacy ratio of the bank i of country j in year t;
N I Mijt = Net interest margin of the bank i of country j in year t;
GDPjt = Gross domestic product (GDP) growth of the country i and in year t;
IFjt = Inflation rate of country j in year t;
RIjt = Real interest rate of country j and in year t;
DumCONi is the country/ASEAN region dummy for indicating the country of origin (including China
(CH), Indonesia (ID), Malaysia (MY), the Philippines (PH), Singapore (SG), Thailand (TH), Vietnam
(VN) and ASEAN region) of the bank (1 = if based in the country; 0 = otherwise).
ε ijt = Error term of the bank i of country j in year t.

3. Results and Discussion

3.1. Descriptive Statistics

Table 3 provides the descriptive statistics on the inputs and outputs used in deriving DEA based
efficiency scores for each bank in the region. Substantial differences were found in almost every variable
across the sampled countries. We focused on two of them, the loans and the deposits, to compare the
relative size of the banking sector of each country in the region. Specifically, we observed higher loans and
deposits for China, followed by Singapore and Thailand, indicating the larger banking markets of these
countries within the region. We also observed that Singapore, which comprises the smallest proportion of
banks in our sample, had the second largest banking sector after China in the region in terms of loans and
deposits. This indicates that Singapore has fewer but larger banks in this region. In contrast, Indonesia,
with the second largest representation in the sample, has a relatively small size of loans and deposits,
indicating the typical Indonesian banking market structure of many smaller banks.
The descriptive statistics of the variables applied in the regression analysis are produced in Table 4.
The table reports the mean, standard deviation, 25th, 50th (median) and 75th percentiles for each variable
in the sample. A few observations from this table are noteworthy for the DEA scores. First, the efficiency
scores for the region have a mean value of above 0.6 (mean = 0.637, median = 0.63), indicating the general
tendency towards efficiency in the region. With these values, we infer that an average bank in the region
suffers from about 36% (i.e., approximately 0.637–1) of the inefficiencies during the period of study.

3.2. DEA Efficiency Estimation

Figure 1 depicts the country-wise mean efficiency scores for the whole period graphically.
Generally, we observed a declining trend in efficiency scores over the period. Efficiency levels in
the Sino-ASEAN region began to fall before the GFC, however, the pace after the crisis was faster.
Specifically, the efficiency of Chinese banks seems to be declining, but at a decreasing rate. In contrast,
except for Thailand and Singapore, the efficiency level of banks in the ASEAN follows a gradual decline
over the period. Apart from a steep fall in efficiency in 2004, the banking sector efficiency of Thailand and
Singapore is relatively stable, hovering around 0.7. These observations imply the relative importance of
location in determining banking sector efficiency during the sample period. We note that although the wave
of the GFC was felt globally, its impact varied considerably between banking markets in different locations.
We summarize in Table 5 the contribution of efficient banks from each country in relative
(percentage) terms in the Sino-ASEAN region. Our results show the dominance of Chinese banks
in the formulation of the efficiency frontier. More specifically, in almost every year, Chinese banks
make up more than half of the banks on the efficient frontier. This also indicates a relative immunity
 Thailand and Singapore is relatively stable, hovering around 0.7. These observations imply the
relative importance of location in determining banking sector efficiency during the sample period.
We note that although the wave of the GFC was felt globally, its impact varied considerably between
banking markets in different locations.
We summarize in Table 5 the contribution of efficient banks from each country in relative
Economies 2019, 7, 13
(percentage) terms in the Sino-ASEAN region. Our results show the dominance of Chinese banks in8 of 23
the formulation of the efficiency frontier. More specifically, in almost every year, Chinese banks make
up more than half of the banks on the efficient frontier. This also indicates a relative immunity in the
in the Chinese banking sector to the crisis. After China, Malaysian banks contribute most to the
Chinese banking sector to the crisis. After China, Malaysian banks contribute most to the efficiency
efficiency frontier, followed by Singapore. Results pertaining to Thailand and Philippines follow an
frontier, followed by Singapore. Results pertaining to Thailand and Philippines follow an almost
almost similar
similar pattern.
pattern. TheirTheir contribution
contribution is noticeably
is noticeably lower inlower in the post-crisis
the post-crisis efficiencyefficiency frontier.
frontier. The
The contribution of the other banking markets seems relatively
contribution of the other banking markets seems relatively volatile. volatile.

Figure
Figure 1. Country-year
1. Country-year wise
wise meanefficiency
mean efficiency score.
score. CN,
CN,ID,
ID,MY,
MY,PH,
PH,SG, THTH
SG, andand
VN VN
referrefer
to China,
to China,
Indonesia,
Indonesia, Malaysia,
Malaysia, Philippines,
Philippines, Singapore,Thailand
Singapore, Thailand and
andVietnam,
Vietnam,respectively.
respectively.

Further,
Further, the the period-wise
period-wise breakupininTable
breakup Table 66 shows
shows most
mostofofthetheefficient banks
efficient belong
banks to China,
belong to China,
followed by Indonesia and Malaysia, during the pre-crisis period. However,
followed by Indonesia and Malaysia, during the pre-crisis period. However, during the crisisduring the crisis period,
period,
the contribution of Indonesian banks declined significantly, while Malaysian and Chinese banks
the contribution of Indonesian banks declined significantly, while Malaysian and Chinese banks remained
remained stable. During the crisis period, the share of Indonesian banks declined drastically to 1% from
stable. During the crisis period, the share of Indonesian banks declined drastically to 1% from 13% in
13% in the pre-crisis period. The share of Singaporean banks on the other hand increased noticeably
the pre-crisis
during the period. The share
crisis period. of Singaporean
We observe banks frombanks on thehave
Singapore otheranhand increased
increasing noticeably
contribution during
to the
the crisis period. We observe banks from Singapore have an increasing contribution to the efficiency
efficiency frontier, especially during the crisis and post-crisis period. In short, our analysis indicates the
frontier, especially
highly during the of
stable contribution crisis and banks
Chinese post-crisis
in theperiod. In frontier,
efficiency short, our analysisofindicates
regardless theThe
the period. highly
sharestable
contribution of Chinese
of Chinese banks
banks rose in 70%
above the efficiency
during thefrontier, regardless
crisis period, mainlyof owing
the period.
to theThe share
decline of of Chineseinbanks
efficiency
other banking
rose above 70% duringmarkets.
the crisis period, mainly owing to the decline of efficiency in other banking markets.

Table 6. Period-wise contribution of each country in the efficient frontier.

Year China Indonesia Malaysia Philippines Singapore Thailand Vietnam All

2000 0.24 0.24 0.17 0.00 0.07 0.14 0.14 1.00
2001 0.60 0.20 0.05 0.05 0.05 0.00 0.05 1.00
2002 0.59 0.13 0.16 0.00 0.03 0.06 0.03 1.00
2003 0.51 0.15 0.12 0.00 0.05 0.10 0.07 1.00
2004 0.50 0.16 0.16 0.06 0.06 0.00 0.06 1.00
2005 0.53 0.03 0.08 0.03 0.18 0.13 0.05 1.00
2006 0.61 0.00 0.07 0.02 0.15 0.02 0.12 1.00
Pre-crisis overall 0.51 0.13 0.12 0.02 0.08 0.06 0.07 1.00
2007 0.75 0.03 0.08 0.00 0.10 0.03 0.03 1.00
2008 0.64 0.00 0.12 0.02 0.12 0.07 0.02 1.00
2009 0.74 0.00 0.06 0.00 0.11 0.00 0.09 1.00
Crisis overall 0.71 0.01 0.09 0.01 0.11 0.03 0.05 1.00
2010 0.62 0.00 0.13 0.02 0.15 0.02 0.06 1.00
2011 0.69 0.03 0.13 0.00 0.08 0.03 0.05 1.00
2012 0.63 0.05 0.10 0.03 0.13 0.00 0.08 1.00
2013 0.60 0.02 0.09 0.02 0.13 0.00 0.13 1.00
Post-crisis overall 0.64 0.03 0.11 0.02 0.12 0.01 0.08 1.00

Table 7 summarizes the mean efficiency scores based on constant returns to scale (CRS) and variable
returns to scale (VRS) for the three periods (i.e., pre-crisis, crisis and post-crisis) for the sampled countries.
The Kruskal–Wallis (KW) test that was performed indicated significant differences between the mean
Economies 2019, 7, 13 9 of 23

scores for each period. The region was more efficient before the crisis period, whereas the lowest efficiency
was observed during the post-crisis period, suggesting a slower pace of recovery after the GFC.

Table 7. DEA efficiency score in the different periods.

Period Obs. CRS VRS

Mean SD Mean SD
Pre-crisis (2000–2006) 874 0.570 0.255 0.733 0.243
Crisis (2007–2009) 721 0.503 0.225 0.653 0.244
Post-crisis (2010–2013) 1275 0.410 0.229 0.561 0.275
Kruskal–Wallis Test
X2 (df = 2) 260.951 217.140
Sig *** ***
CRS: Constant return to scale, VRS: Variable return to scale SE: Scale efficiency (SE = CRS/VRS) *** Represent 1%
significant level.

3.3. Diagnostic Test

In order to test for the integration and stationary properties of the variables used in this study,
we applied the Fischer-augmented Dickey-Fuller (ADF) panel unit root test. The econometric literature
offers a number of unit root tests, however, the Fischer-ADF root test is advantageous to use as it
allows for maximum heterogeneity across units. Maddala and Wu (1999) applied non-parametric
methods to conduct a Fischer-ADF unit root test. The test performs the null hypothesis that the series
is non-stationary (or it has unit root). Table 8 summarizes the test statistics from the Fischer-ADF test
in all versions, with and without trend and drift. The results indicate that the hypothesis of the unit
root is rejected at a 1% level, in favor of stationarity.

Table 8. Unit root test of the variables.

Efficiency Bank Size ROAA CAR NIM GDP Growth Inflation Real Interest
Trend chi2 1294.00 * 918.86 * 2001.28 1699.02 * 1351.58 * 1344.99 * 1620.44 * 1554.90 *
Drift chi2 1787.84 * 1253.71 * 2181.22 * 1735.76 * 1821.95 * 1956.16 * 2449.30 * 2359.75 *
None chi2 1992.05 * 1544.02 * 2911.95 * 2275.53 * 1848.21 * 1944.25 * 2196.38 * 2014.99 *
* Significant at 1% level of confidence. Fisher test for panel unit root using an augmented Dickey-Fuller test (0 lags).

Table 9 reports the univariate correlation between DEA efficiency scores and various determinants
of bank efficiency. Correlation analysis is essential to understand the direction and strength of the
two variables (Banna et al. 2018). It is also helpful as a pre-regression diagnosis for multicollinearity
between the studied variables. The results show that most of our selected proxies for various firm
characteristics are significantly correlated with the efficiency scores. However, none of them are too
highly correlated to cause the multicollinearity problem. We found that size, profitability, capitalization
and GDP had a positive correlation with bank efficiency, while interest, inflation and the net interest
margin (NIM), on the other hand, had a negative correlation.

Table 9. Univariate correlation.

1 2 3 4 5 6 7 8
Bank efficiency (1) 1
Bank size (2) 0.2514 * 1
ROAA (3) 0.0307 −0.0177 1
CAR (4) 0.0329 −0.5071 * 0.1037 * 1
NIM (5) −0.2276 * −0.2523 * 0.1448 * 0.2055 * 1
GDP (6) 0.2985 * 0.1945 * −0.0334 −0.1349 * −0.1335 * 1
Inflation (7) −0.3526 * −0.2277 * 0.0361 0.0189 0.1615 * −0.1831 * 1
Interest (8) −0.0968 * −0.0624 * 0.0147 0.0657 * 0.0583 * −0.3562 * −0.3151 * 1
* Significant at 1% level of confidence.
Economies 2019, 7, 13 10 of 23

3.4. Regression Results

Since efficiency scores are constrained between zero and one (Fried et al. 1993), we estimated
the model through Tobit regression. Dougherty (2001) noted that ordinary least squares (OLS) yields
biased estimates in this case. From Model 1–9, we calculate Equation (2) using the dummy for a specific
country in each model to test if the geographical location effect is evidenced through the significance
of the country’s dummy coefficient (see Table 10). Model 8 uses an ASEAN dummy, holding China in
the reference category. Finally, for an additional check of robustness, we ran a common model (Model
9) including all the country dummies for each country except China, which we held as a reference.
In each model, we controlled the commonly used bank-specific and country-specific determinants
of efficiency to isolate the effect of the geographical location. The bank-specific variables included size
(proxied by the natural log of assets), profitability measures such as ROAA and NIM and capitalization,
measured as a capital ratio. The country-specific variables included GDP, inflation and the real interest
rate. In bank-specific covariates, size and efficiency have a complex relationship, as some studies have
found a positive relationship (Berger 1995; Hasan and Marton 2003), while others have observed negative
relationship (Allen and Rai 1996; Kaparakis et al. 1994). The empirical relationship between profitability
and efficiency is also unclear, although, profitability should positively affect efficiency (Berger 1995).
Some studies (such as Altunbas et al. 2000 among others) have found a negative relationship profitability
and efficiency.
Capitalization may influence bank performance in either direction. A low capital ratio magnifies
risk, which may lead to an inverse relationship between capitalization and efficiency, as more efficient
banks can afford to take greater risks (Berger 1995). However, an argument can also be made in favor
of a positive relationship, as a lower capitalization ratio might decrease the bank’s cost of capital
(Molyneux 1993) and expected costs of financial distress (Berger 1995). Previous studies generally
support a positive relationship (Berger 1995; Demirgüç-Kunt and Huizinga 1999; Goddard et al. 2004
among others). Bank efficiency may also be sensitive to changes in macroeconomic conditions.
Therefore, we use GDP to control for economic development and inflation to control for economic
stability. Growth might lead to an overall increase in banking sector efficiency, resulting in a direct
relationship between GDP and efficiency. Inflation may affect bank efficiency through the channel of
the real value of banking sector costs and revenue (Perry 1992).
Table 10 displays the Tobit regression results for the geographical location effect and other control
variables. Model 1 (as given in Equation (2)) tests the country effect of China, using the dummy for
China. Applying a similar procedure, we run the regressions for each of the other six countries in
the sample (Model 2–7) and the ASEAN countries (Model 8). Turning to the results, we first noticed
that all of the country dummies returned significantly in Models 1–8, which suggests evidence of the
geographical location effect during the period of analysis. For a further check of robustness, Model
9 employs all the country dummies in a single model and tests our first hypotheses by determining
whether the coefficients of the country dummies were significant individually (H0: γ8−14 = 0) and
Equation (2) determines whether they differed significantly from each other (H0 : γ8 = γ9 = γ10 =
γ11 = γ12 = γ13 = γ14 ). We held China as a reference to avoid the dummy variable trap. The results of
the Wald test suggest a rejection of the null hypothesis of equality of intercepts of the banking markets
under study. Therefore, our results bolster the hypothesis that the location or banking market has an
important and significant role in explaining banking sector efficiency in the Sino-ASEAN region.
Among the bank-specific factors, size, profitability and capitalization returned as positive and
highly significant (p < 0.01), with highly stable estimates across all the models applied in our study,
supporting the findings of Mester (1996), Lozano-Vivas et al. (2002) and Carbo et al. (2003). Turning to
the country level determinants, we observed the significant positive impact of the country’s growth
on bank efficiency. This suggests that countries experiencing higher growth also had a more efficient
banking sector during the period of study. Our result is consistent with Grigorian and Manole (2006).
Both inflation and real interest, on the other hand, returned a negative coefficient in the regression.
Economies 2019, 7, 13 11 of 23

As expected, this confirms the detrimental effect of economic instability on the efficiency of the banking
sector. Our results thus support Tajgardoon et al. (2012).
We extended our analysis of the location effect on banking sector efficiency by including the effect
of the global financial crisis (see Tables 11–13). In order to achieve this objective, we divided our sample
into three sub-periods (pre-crisis, 2000–2006; crisis, 2007–2009; post-crisis, 2010–2013) and performed
the regression analysis for each period. The significantly positive country dummy coefficients in our
model suggested that during the pre-crisis period, banks belonging to China and Indonesia were
more likely to be efficient due to the geographical location effect. No other country dummy returned
as positive, suggesting that banks in these nations experienced relatively low efficiency during this
period, which could be attributed to the geographical location effect.
The results during the crisis period further bolster the evidence of the geographical location effect
on the efficiency scores of banks. We observed that unlike in the pre-crisis period, the Indonesian
dummy returned as negative and significant, whereas Malaysia returned as significantly positive.
These results suggest that Indonesian banks were no longer able to capitalize on the positive effect as
they had before. We found the same tendency among Chinese banks in the crisis period as in the period
before the crisis. Finally, evidence for geographical location effect was also found when we found
a significantly negative coefficient for the Chinese dummy, which was consistently positive during
the previous periods. The decline in banking performance, especially the efficiency of the banks in
China, may be due to non-performing loans and special mention loans (Jiang et al. 2007). On the other
hand, Singapore and Thailand returned as significantly positive in the model, which were showing a
negative effect during the earlier periods. The changing signs of the country dummies were statistically
significant during the different periods of our location effect analysis, clearly indicating the importance
of the geographical location effect in terms of banking sector efficiency in the Sino-ASEAN region.

3.5. Robustness Check

The results presented and discussed so far need to be interpreted with caution, due to the violation
of independence within the sample, which is one of the fundamental assumptions of the regression
method. The problem of dependency within the sample stems from the inherently dependent nature
of the efficiency score. To overcome this limitation we applied a bootstrapping technique, as described
by Xue and Harker (1999).
To implement the bootstrapping technique, we first created the sample probability distribution F̂
and assigned each decision-making unit (DMU) a probability of 1/n3 . We then created 1000 random
bootstrap samples, each with 220 banks from the observed sample of 220 banks in the Sino-ASEAN
region, and computed the DEA based efficiency scores for each bootstrap sample. For each bootstrap


sample, we fit the following regression equation and estimated the standard error se b c β̂ j by the


sample standard deviation of the 1000 bootstrap replications of β̂ j . Finally, we applied the traditional
t-test to test the hypothesis of β j = 0 against β j 6= 0 at a conventional 5% level.
The estimates from the bootstrapping procedure are summarized in Table 14. The results of
bootstrap regression are fairly similar to our earlier findings. The F test signifies the rejection of the
null hypothesis that the intercepts for the seven banking systems are equal. Likewise, all the results for
the control variables were similar to our previous Tobit regression.
As Simar and Wilson (2007, 2011) criticized the Tobit regression model because of biased
estimations, misspecification and separability issues. Based on their suggestion, we also ran the
Simar and Wilson (2007) double bootstrapped truncated regression model, using 2000 replications in
the second stage holding separability assumption. The double bootstrapping results are presented in
Table 15.

3 To complete this exercise, the balanced sample on a pooled Sino-ASEAN basis (220 observations) was considered.
Economies 2019, 7, 13 12 of 23

Table 10. Determinants of bank efficiency (Tobit regression) with the geographical location effect.

Exp. Sign Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
0.031 *** 0.032 *** 0.034 *** 0.032 *** 0.032 *** 0.033 *** 0.033 *** 0.031 *** 0.021 ***
Size +/−
(0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003)
0.008 *** 0.008 *** 0.007 *** 0.007 *** 0.007 *** 0.008 0.008 *** 0.008 *** 0.008 ***
ROAA +
(0.003) (0.003) (0.003) (0.002) (0.003) (0.003) (0.003) (0.003) (0.003)
0.006 *** 0.006 *** 0.006 *** 0.006 *** 0.006 *** 0.006 *** 0.007 *** 0.006 *** 0.005 ***
CAR +
(0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001)
−0.016 *** −0.016 *** −0.016 *** −0.015 *** −0.015 *** −0.016 *** −0.018 *** −0.016 *** −0.012 ***
NIM +/−
(0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002)
0.016 *** 0.021 *** 0.023 *** 0.019 *** 0.022 *** 0.022 *** 0.021 *** 0.016 *** 0.019 ***
GDP +
(0.003) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.003) (0.003)
−0.021 *** −0.021 *** −0.021 *** −0.023 *** −0.022 *** −0.022 *** −0.020 *** −0.021 *** −0.011 ***
IF −
(0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002)
−0.010 *** −0.009 *** −0.009 *** −0.010 *** −0.010 *** −0.010 *** −0.010 *** −0.010 *** −0.005 **
RI −
(0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002)
0.050 ***
CN
(0.017)
−0.034 ** −0.133 ***
ID
(0.015) (0.022)
0.054 *** 0.015
MY
(0.019) (0.023)
−0.106 *** −0.170 ***
PH
(0.020) (0.024)
0.182 *** 0.144 ***
SG
(0.029) (0.031)
0.038 * −0.001
TH
(0.020) (0.024)
−0.070 *** −0.161 ***
VN
(0.018) (0.024)
−0.050 ***
ASEAN
(0.017)
−0.042 *** −0.040 *** −0.039 *** −0.039 *** −0.039 *** −0.040 *** −0.039 *** −0.041 *** −0.041 ***
Time trend
(0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001)
0.389 *** 0.371 *** 0.324 *** 0.383 *** 0.354 *** 0.348 *** 0.364 *** 0.439 *** 0.452 ***
Constant
(0.040) (0.039) (0.040) (0.039) (0.039) (0.039) (0.039) (0.048) (0.047)
Economies 2019, 7, 13 13 of 23

Table 10. Cont.

Exp. Sign Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
Pseudo R2 0.3571 0.3558 0.3569 0.3652 0.3698 0.3551 0.3596 0.3571 0.4088
Adjusted R2 (OLS) 0.2606 0.2602 0.2608 0.2665 0.2653 0.2610 0.2630 0.2606 0.2956
LR chi2 869.07 865.76 868.61 888.81 899.99 864.13 875.15 869.07 994.96
Prob > chi2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Log likelihood −782.25 −783.91 −782.48 −772.38 −766.79 −784.72 −779.21 −782.25 −719.31
Obs. 2870 2870 2870 2870 2870 2870 2870 2870 2870
Dependent variable = DEA score, ***, **, and * represent significance at 1%, 5% and 10% levels of confidence. ROAA, CAR, NIM, IF, RI, CN, ID, MY, PH, SG, TH and VN refer to return on
average assets, capital adequacy ratio, net interest margin, inflation, real interest rate, China, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, respectively. All other
variables are defined in Table 1.

Table 11. Determinants of bank efficiency (Tobit regression) pre-crisis.

Exp. Sign Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
0.038 *** 0.044 *** 0.038 *** 0.037 *** 0.038 *** 0.046 *** 0.035 *** 0.038 *** 0.046 ***
Size +/−
(0.005) (0.005) (0.005) (0.005) (0.005) (0.006) (0.005) (0.005) (0.005)
0.012 *** 0.006 0.008 * 0.006 0.009 * 0.007 0.009 ** 0.012 *** 0.006
ROAA +
(0.004) (0.004) (0.005) (0.003) (0.005) (0.005) (0.005) (0.004) (0.004)
0.008 *** 0.008 *** 0.007 *** 0.007 *** 0.007 *** 0.008 *** 0.007 *** 0.008 *** 0.009 ***
CAR +
(0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001)
−0.019 *** −0.023 *** −0.019 *** −0.017 *** −0.020 *** −0.020 *** −0.020 *** −0.019 *** −0.018 ***
NIM +/−
(0.004) (0.004) (0.004) (0.004) (0.004) (0.004) (0.004) (0.004) (0.004)
−0.021 *** 0.031 *** 0.027 *** 0.025 *** 0.028 *** 0.021 *** 0.028 *** −0.021 *** −0.025 ***
GDP +
(0.006) (0.004) (0.004) (0.004) (0.004) (0.004) (0.004) (0.006) (0.006)
−0.023 *** −0.039 *** −0.027 *** −0.028 *** −0.027 *** −0.030 *** −0.027 *** −0.023 *** −0.031 ***
IF −
(0.002) (0.003) (0.003) (0.002) (0.002) (0.003) (0.002) (0.002) (0.003)
0.004 * 0.008 *** 0.010 *** 0.010 *** 0.010 *** 0.010 *** 0.009 *** 0.004 * 0.004 *
RI −
(0.002) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.002) (0.002)
0.394 ***
CN
(0.038)
0.169 *** −0.311 ***
ID
(0.028) (0.052)
−0.002 −0.376 ***
MY
(0.028) (0.045)
−0.181 *** −0.519 ***
PH
(0.030) (0.050)
Economies 2019, 7, 13 14 of 23

Table 11. Cont.

Exp. Sign Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
−0.036 −0.306 ***
SG
(0.049) (0.051)
−0.145 *** −0.489 ***
TH
(0.029) (0.047)
−0.079 −0.350 ***
VN
(0.029) (0.044)
−0.394 ***
ASEAN
(0.038)
−0.038 *** −0.042 *** −0.048 *** −0.042 *** −0.047 *** −0.045 *** −0.047 *** −0.038 *** −0.031 ***
Time trend
(0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005)
0.611 *** 0.333 *** 0.390 *** 0.422 *** 0.387 *** 0.408 *** 0.418 *** 1.005 *** 0.988 ***
Constant
(0.060) (0.059) (0.062) (0.058) (0.060) (0.059) (0.060) (0.081) (0.085)
Pseudo R2 0.7052 0.6194 0.5726 0.6164 0.5733 0.6040 0.5820 0.7052 0.7812
Adjusted R2 0.4502 0.4253 0.4021 0.4301 0.4032 0.4123 0.4066 0.4502 0.4825
LR chi2 556.06 488.39 451.51 486.06 452.05 476.27 458.94 556.06 615.95
Prob > chi2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Log likelihood −116.22 −150.06 −168.50 −151.22 −168.23 −156.12 −164.78 −116.22 −86.28
Obs. 874 874 874 874 874 874 874 874 874
Dependent variable = DEA score, ***, **, and * represent significance at 1%, 5% and 10% levels of confidence. ROAA, CAR, NIM, IF, RI, CN, ID, MY, PH, SG, TH and VN refer to return on
average assets, capital adequacy ratio, net interest margin, inflation, real interest rate, China, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, respectively. All other
variables are defined in Table 1.

Table 12. Determinants of bank efficiency (Tobit regression) during the crisis.

Exp. Sign Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
0.073 *** 0.070 *** 0.080 *** 0.079 *** 0.078 *** 0.078 *** 0.079 *** 0.073 *** 0.061 ***
Size +/−
(0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005)
−0.000 −0.002 −0.001 −0.001 −0.001 −0.000 −0.000 −0.000 −0.001
ROAA +
(0.003) (0.002) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.002)
0.012 *** 0.011 *** 0.012 *** 0.012 *** 0.012 *** 0.012 *** 0.012 *** 0.012 *** 0.010 ***
CAR +
(0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001)
−0.010 *** −0.004 −0.010 *** −0.011 *** −0.011 *** −0.012 *** −0.012 *** −0.010 *** −0.002
NIM +/−
(0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003)
0.003 0.016 *** 0.021 *** 0.017 *** 0.019 *** 0.019 *** 0.018 *** 0.003 0.013 ***
GDP +
(0.003) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.003) (0.003)
Economies 2019, 7, 13 15 of 23

Table 12. Cont.

Exp. Sign Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
−0.016 *** −0.020 *** −0.019 *** −0.021 *** −0.020 *** −0.020 *** −0.020 *** −0.016 *** −0.006 **
IF −
(0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.003) (0.002) (0.003)
−0.018 *** −0.018 *** −0.017 *** −0.019 *** −0.018 *** −0.018 *** −0.018 *** −0.018 *** −0.009 ***
RI −
(0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003)
0.165 ***
CN
(0.029)
−0.162 *** −0.259 ***
ID
(0.019) (0.028)
0.143 *** 0.031
MY
(0.029) (0.036)
−0.017 −0.164 ***
PH
(0.028) (0.035)
0.082 ** 0.012
SG
(0.038) (0.041)
0.044 −0.035
TH
(0.032) (0.039)
−0.025 −0.207 ***
VN
(0.029) (0.036)
−0.165 ***
ASEAN
(0.029)
−0.091 *** −0.021 *** −0.011 −0.021 * −0.016 −0.016 −0.018 * −0.091 *** −0.055 ***
Time trend
(0.013) (0.010) (0.011) (0.011) (0.011) (0.011) (0.011) (0.013) (0.015)
0.020 *** 0.053 −0.108 * −0.040 −0.048 −0.051 −0.044 0.185 ** 0.113 *
Constant
(0.062) (0.060) (0.063) (0.063) (0.063) (0.063) (0.063) (0.072) (0.067)
Pseudo R2 1.2049 1.2840 1.1862 1.1359 1.1453 1.1392 1.1367 1.2049 1.4195
Adjusted R2 0.5216 0.5551 0.5146 0.4976 0.5003 0.5015 0.4978 0.5216 0.5972
LR chi2 551.76 587.97 543.15 520.12 524.43 521.65 520.51 551.76 650.01
Prob > chi2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Log likelihood 46.92 65.03 42.62 31.11 33.26 31.87 31.30 46.92 96.05
Obs. 721 721 721 721 721 721 721 721 721
Dependent variable = DEA score, ***, **, and * represent significance at 1%, 5% and 10% levels of confidence. ROAA, CAR, NIM, IF, RI, CN, ID, MY, PH, SG, TH and VN refer to return on
average assets, capital adequacy ratio, net interest margin, inflation, real interest rate, China, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, respectively. All other
variables are defined in Table 1.
Economies 2019, 7, 13 16 of 23

Table 13. Determinants of bank efficiency (Tobit regression) post-crisis.

Exp. Sign Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
0.064 *** 0.061 *** 0.062 *** 0.059 *** 0.058 *** 0.060 *** 0.062 *** 0.064 *** 0.055 ***
Size +/−
(0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005)
0.021 *** 0.022 *** 0.022 *** 0.026 *** 0.022 *** 0.023 *** 0.022 *** 0.021 *** 0.026 ***
ROAA +
(0.007) (0.007) (0.007) (0.007) (0.007) (0.007) (0.007) (0.007) (0.007)
0.008 *** 0.008 *** 0.008 *** 0.008 *** 0.007 *** 0.008 *** 0.008 *** 0.008 *** 0.007 ***
CAR +
(0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001)
−0.009 *** −0.009 *** −0.009 *** −0.008 *** −0.007 *** −0.009 *** −0.009 *** −0.009 *** −0.005 *
NIM +/−
(0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003)
0.019 *** 0.015 *** 0.015 *** 0.013 *** 0.014 *** 0.017 *** 0.015 *** 0.019 *** 0.019 ***
GDP +
(0.005) (0.004) (0.004) (0.004) (0.004) (0.004) (0.004) (0.005) (0.005)
−0.027 *** −0.025 *** −0.025 *** −0.027 *** −0.026 *** −0.024 *** −0.025 *** −0.027 *** −0.028 ***
IF −
(0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.004) (0.003) (0.005)
−0.027 *** −0.024 *** −0.025 *** −0.027 *** −0.029 *** −0.025 *** −0.025 *** −0.027 *** −0.029 ***
RI −
(0.003) (0.004) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.005)
−0.038 *
CN
(0.023)
−0.017 0.009
ID
(0.024) (0.034)
0.009 0.030
MY
(0.029) (0.031)
−0.121 *** −0.101 ***
PH
(0.030) (0.033)
0.327 *** 0.344 ***
SG
(0.044) (0.046)
0.052 * 0.079 **
TH
(0.031) (0.035)
−0.001 0.030
VN
(0.034) (0.044)
0.038 *
ASEAN
(0.023)
−0.026 ** −0.037 *** −0.026 *** −0.026 *** −0.018 ** −0.024 *** −0.026 *** −0.026 ** −0.026 **
Time trend
(0.010) (0.010) (0.009) (0.009) (0.009) (0.009) (0.009) (0.010) (0.012)
0.019 0.038 0.029 0.090 0.069 0.019 0.037 −0.019 0.064
Constant
(0.067) (0.066) (0.071) (0.067) (0.066) (0.067) (0.067) (0.074) (0.077)
Pseudo R2 0.4937 0.4913 0.4909 0.5081 0.5503 0.4937 0.4908 0.4937 0.5735
Adjusted R2 0.3247 0.3236 0.3233 0.3330 0.3486 0.3267 0.3233 0.3247 0.3602
Economies 2019, 7, 13 17 of 23

Table 13. Cont.

Exp. Sign Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
LR chi2 477.96 475.60 475.22 491.83 532.75 477.93 475.12 477.96 555.15
Prob > chi2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Log likelihood −245.05 −246.24 −246.43 −238.12 −217.66 −245.07 −246.48 −245.05 −206.46
Obs. 1275 1275 1275 1275 1275 1275 1275 1275 1275
Dependent variable = DEA score, ***, **, and * represent significance at 1%, 5% and 10% levels of confidence. ROAA, CAR, NIM, IF, RI, CN, ID, MY, PH, SG, TH and VN refer to return on
average assets, capital adequacy ratio, net interest margin, inflation, real interest rate, China, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, respectively. All other
variables are defined in Table 1.

Table 14. Determinants of bank efficiency (bootstrap (1000 replication) Tobit regression) with the geographical location effect.

Exp. Sign Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
0.031 *** 0.032 *** 0.034 *** 0.032 *** 0.032 *** 0.033 *** 0.033 *** 0.031 *** 0.021 ***
Size +/−
(0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003)
0.008 * 0.008 * 0.007 * 0.007 * 0.007 * 0.008 * 0.008 * 0.008 * 0.008 *
ROAA +
(0.004) (0.004) (0.004) (0.004) (0.004) (0.005) (0.004) (0.005) (0.005)
0.006 *** 0.006 *** 0.006 *** 0.006 *** 0.006 *** 0.006 *** 0.007 *** 0.006 *** 0.005 ***
CAR +
(0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001)
−0.016 *** −0.016 *** −0.016 *** −0.015 *** −0.015 *** −0.016 *** −0.018 *** −0.016 *** −0.012 ***
NIM +/−
(0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003)
0.016 *** 0.021 *** 0.023 *** 0.019 *** 0.022 *** 0.022 *** 0.021 *** 0.016 *** 0.019 ***
GDP +
(0.003) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.003) (0.003)
−0.021 *** −0.021 *** −0.021 *** −0.023 *** −0.022 *** −0.022 *** −0.020 *** −0.021 *** −0.011 ***
IF −
(0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002)
−0.010 *** −0.009 *** −0.009 *** −0.010 *** −0.010 *** −0.010 *** −0.010 *** −0.010 *** −0.005 **
RI −
(0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002)
0.050 ***
CN
(0.018)
−0.034 ** −0.133 ***
ID
(0.015) (0.024)
0.054 *** 0.015
MY
(0.019) (0.025)
−0.106 *** −0.170 ***
PH
(0.016) (0.023)
0.182 *** 0.144 ***
SG
(0.036) (0.040)
Economies 2019, 7, 13 18 of 23

Table 14. Cont.

Exp. Sign Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
0.038 ** −0.001
TH
(0.019) (0.025)
−0.070 *** −0.161 ***
VN
(0.019) (0.027)
−0.050 ***
ASEAN
(0.019)
−0.042 *** −0.040 *** −0.039 *** −0.039 *** −0.039 *** −0.040 *** −0.039 *** −0.041 *** −0.041 ***
Time trend
(0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) (0.001)
0.389 *** 0.371 *** 0.324 *** 0.383 *** 0.354 *** 0.348 *** 0.364 *** 0.439 *** 0.452 ***
Constant
(0.044) (0.042) (0.043) (0.042) (0.041) (0.041) (0.042) (0.051) (0.050)
Pseudo R2 0.3571 0.3558 0.3569 0.3652 0.3698 0.3551 0.3596 0.3571 0.4088
LR chi2 883.59 956.98 875.51 942.65 963.31 925.59 796.69 936.89 1163.0
Prob > chi2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Log likelihood −782.25 −783.91 −782.48 −772.38 −766.79 −784.72 −779.21 −782.25 −719.31
Obs. 2860 2860 2860 2860 2860 2860 2860 2860 2860
Dependent variable = DEA score, ***, **, and * represent significance at 1%, 5% and 10% levels of confidence. ROAA, CAR, NIM, IF, RI, CN, ID, MY, PH, SG, TH and VN refer to return on
average assets, capital adequacy ratio, net interest margin, inflation, real interest rate, China, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, respectively. All other
variables are defined in Table 1.
Economies 2019, 7, 13 19 of 23

The results of the double bootstrap regression model suggest that Chinese banks outperform
ASEAN banks in terms of efficiency and that the GFC had a significant impact on bank efficiency
in Sino-ASEAN countries. These results are similar to our earlier findings. Likewise, all the results
for the control variables were similar to our previous direct Tobit regression and bootstrapping Tobit
regression models. Overall, these findings suggest that although direct Tobit regression may yield
misleading results, however, in the case of this study, the results are reliable, as verified by the
bootstrapping and double bootstrapping regression models.

Table 15. Determinants of bank efficiency (bootstrap (2000 replication) Simar and Wilson
2007 regression) with geographical location effect.

Dep. Var: Efficiency Score Exp. Sign Model 1 Model 2 Model 3

0.061 *** 0.061 *** 0.062 ***
Size +/−
(0.004) (0.003) (0.003)
0.010 *** 0.010 *** 0.010 ***
ROAA +
(0.003) (0.003) (0.003)
0.005 *** 0.005 *** 0.005 ***
CAR +
(0.001) (0.001) (0.001)
−0.008 *** −0.008 *** −0.008 ***
NIM +/−
(0.002) (0.002) (0.002)
0.007 *** 0.007 *** 0.008 ***
GDP +
(0.002) (0.002) (0.002)
−0.017 *** −0.017 *** −0.016 ***
IF −
(0.001) (0.001) (0.001)
−0.007 *** −0.007 *** −0.006 ***
RI −
(0.001) (0.002) (0.002)
0.092 ***
CN
(0.015)
−0.092 ***
ASEAN
(0.015)
0.039 ***
Crisis
(0.010)
−0.042 *** −0.042 *** −0.041 ***
Time trend
(0.001) (0.001) (0.002)
Wald chi2 1144.54 1138.16 1174.93
Prob > chi2 0.0000 0.0000 0.0000
Obs. 2347 2347 2347
Dependent variable = DEA score, ***, **, and * represent significance at 1%, 5% and 10% levels of confidence. ROAA,
CAR, NIM, IF, RI and CN refer to return on average assets, capital adequacy ratio, net interest margin, inflation, real
interest rate and China, respectively. Crisis refers to the global financial crisis. All other variables are defined in
Table 1.

4. Conclusions and Recommendation

The main objective of this paper was to assess the importance of the geographical location effect
on banking sector efficiency in the Sino-ASEAN region. We extended our analysis further by studying
the significance of the geographical effect during and around the global financial crisis. DEA based
efficiency scores were first derived as a proxy to banking sector efficiency across the region to be
evaluated through Tobit regression and the Simar and Wilson (2007) double bootstrapping method.
The results suggest that Chinese banks have a dominating power in the formulation of the
frontier. After China, Malaysian banks contribute most to the efficiency frontier, followed by Singapore.
The contribution of Chinese banks in the efficiency frontier matters a lot. Although the Chinese banking
sector is outperforming the ASEAN banking sector in terms of efficiency, the Chinese banking sector
efficiency sharply declines over the period. Hence, the overall efficiency frontier is contracting and
China is driving that contraction. The results clearly indicate the significance of country-specific factors
in explaining banking sector efficiency across the region. One of the contributions of this paper was to
assess the role of country-specific aspects during and around the global financial crisis. Our piecewise
Economies 2019, 7, 13 20 of 23

regression for the pre-crisis, crisis and post-crisis periods suggests that the geographical location
effect was a significant determinant of banking sector efficiency throughout the period of our analysis.
The results indicate that much of the variation in the efficiency of banking markets in the Sino-ASEAN
region are due to the geographical location and country-specific factors. Similar to the findings of earlier
studies in Europe (Pastor et al. 1997), our study confirms the role of country-specific factors as the
major determinants of banking efficiency level across the Sino-ASEAN region. Xue and Harker (1999)
identified the dependency problem in DEA based scores, which contradicts with the basic regression
model. The presence of a dependency problem thus may lead to unverifiable results. Following the
authors’ suggestion, bootstrapping and double bootstrapping were used to overcome this problem.
The results, however, were consistent with the direct Tobit regression.
Policymakers, regulators and investors should closely monitor the performance of banking
in the Sino-ASEAN region. Although China and Singapore are performing better as compared
to other countries in the region, policymakers and regulators should be more vigilant while
following the strategic policies of liberalization, regulation and consolidation in these two countries.
Policymakers might place emphasis on mitigating non-performing loans and special mention loans that
may potentially reduce the efficiency level of Chinese banks. In the ASEAN region, which consists of
countries with different stages of economic and financial development, there also exists a big problem
in the harmonization of regulations, in terms of which criterion should be based. To accommodate
the various risks entailed in the harmonization process, it will be necessary to allow some room for
flexibility to member states. For instance, when the entry criteria of foreign banks may be too liberal to
some of the member states, there will be a risk that foreign banks with loose risk management will be
allowed to enter into such countries, destabilizing the financial system of them. In such a case, it may
become necessary for them to take some discriminatory treatments (from domestic banks), depending
on the risk management capacity of the entering banks. On the other hand, in the case of a country
with a less developed financial market, there is a risk that its domestic market will be dominated by
foreign banks. In this case, there will be a need to allow the country to put off the entry liberalization
schedule or put a ceiling on the share of foreign banks in the domestic market. This research can
be extended further by analyzing the dynamic relationship of the regulatory framework, ownership
structure and bank efficiency in the Sino-ASEAN region, as well as other Asian countries.

Author Contributions: Conceptualization, H.B. and A.H.M.N.; Formal analysis, S.K.B.S. and H.B.; Investigation,
H.B., S.K.B.S. and A.H.M.N.; Methodology, H.B.; Resources, H.B.; Software, H.B.; Writing—original draft, H.B.;
Writing—review & editing, H.B., S.K.B.S., A.H.M.N., R.A., and M.M.M.
Funding: This research was funded by Centre for Poverty and Development Studies (CPDS)/Ungku Aziz
Centre for Development Studies, Faculty of Economics and Administration, University of Malaya, grant
number: PD004-2018.
Acknowledgments: Authors would like to thank Koh Hsieng Yang Eric, Chan Sok Gee, Aslam Mia, Md Sohel
Rana and Centre for Poverty and Development Studies (CPDS) for their critical review, precious comments and
technical support.
Conflicts of Interest: The authors declare no conflict of interest.

References
Abd Karim, Mohd Zaini. 2001. Comparative bank efficiency across select ASEAN countries.
ASEAN Economic Bulletin 18: 289–304. [CrossRef]
ADB, ASEAN. 2013. The Road to ASEAN Financial Integration: A Combined Study on Assessing the Financial Landscape and
Formulating Milestones for Monetary and Financial Integration in ASEAN. Manila: Asian Development Bank.
Allen, Linda, and Anoop Rai. 1996. Operational efficiency in banking: An international comparison. Journal of
Banking & Finance 20: 655–72.
Altunbas, Y., M. H. Liu, P. Molyneux, and R. Seth. 2000. Efficiency and risk in Japanese banking. Journal of Banking
& Finance 24: 1605–28.
Athanasoglou, Panayiotis, Manthos Delis, and Christos Staikouras. 2008. Determinants of Bank Profitability in the
South Eastern European Region. Journal of Financial Decision Making 2: 1–17.
Economies 2019, 7, 13 21 of 23

Atkinson, Scott E., and Paul W. Wilson. 1995. Comparing mean efficiency and productivity scores from small
samples: A bootstrap methodology. Journal of Productivity Analysis 6: 137–52. [CrossRef]
Banna, Hasanul, Rubi Ahmad, and Eric HY Koh. 2017. Determinants of Commercial Banks’ Efficiency in
Bangladesh: Does Crisis Matter? The Journal of Asian Finance, Economics and Business 4: 19–26. [CrossRef]
Banna, Hasanul, Rubi Ahmad, and Eric H. Y. Koh. 2018. How does total quality management influence the loan
quality of the bank? Total Quality Management & Business Excellence 29: 287–300. [CrossRef]
Barry, Thierno Amadou, Laetitia Lepetita, and Amine Tarazia. 2010. Ownership Structure and Bank Efficiency in
Six Asian Countries. Philippine Management Review (Special Issue) 18: 19–35.
Berger, Allen N. 1995. The profit-structure relationship in banking—Tests of market-power and efficient-structure
hypotheses. Journal of Money, Credit and Banking 27: 404–31. [CrossRef]
Berger, Allen N., and David B. Humphrey. 1997. Efficiency of financial institutions: International survey and
directions for future research. European Journal of Operational Research 98: 175–212. [CrossRef]
Berger, Allen N., Iftekhar Hasan, and Mingming Zhou. 2009. Bank ownership and efficiency in China: What will
happen in the world’s largest nation? Journal of Banking & Finance 33: 113–30.
Carbo, Santiago, Edward P. M. Gardener, and Jonathan Williams. 2003. A note on technical change in banking:
The case of European savings banks. Applied Economics 35: 705–19. [CrossRef]
Casu, Barbara, and Philip Molyneux. 2003. A comparative study of efficiency in European banking.
Applied Economics 35: 1865–76. [CrossRef]
Chan, Sok-Gee, Eric H. Y. Koh, Fauzi Zainir, and Chen-Chen Yong. 2015. Market structure, institutional framework
and bank efficiency in ASEAN 5. Journal of Economics and Business 82: 84–112. [CrossRef]
Coelli, Tim, D. S. Prasada Rao, and George E. Battese. 1998. An Introduction to Efficiency and Productivity.
Boston: Analysis, Kluwer Academic Publishers.
Dacanay, Santos José O. 2007. Profit and cost efficiency of Philippine commercial banks under periods of
liberalization, crisis and consolidation. The Business Review 7: 315–22.
Daraio, Cinzia, Léopold Simar, and Paul W. Wilson. 2018. Central limit theorems for conditional efficiency
measures and tests of the ‘separability’ condition in non-parametric, two-stage models of production.
The Econometrics Journal 21: 170–91. [CrossRef]
Demirgüç-Kunt, Ash, and Harry Huizinga. 1999. Determinants of commercial bank interest margins and
profitability: Some international evidence. The World Bank Economic Review 13: 379–408. [CrossRef]
Dong, Yizhe, Robert Hamilton, and Mark Tippett. 2014. Cost efficiency of the Chinese banking sector: A
comparison of stochastic frontier analysis and data envelopment analysis. Economic Modelling 36: 298–308.
[CrossRef]
Dougherty, Christopher. 2001. Introduction to Econometrics. Oxford: Oxford University Press.
Efron, Bradley. 1979. Bootstrap methods: Another look at the jackknife. The Annals of Statistics 7: 1–26. [CrossRef]
Ferrier, Gary D., and Vivian Valdmanis. 1996. Rural hospital performance and its correlates. Journal of
Productivity Analysis 7: 63–80. [CrossRef]
Fried, Harold O., C. A. Knox Lovell, and Shelton S. Schmidt. 1993. The Measurement of Productive Efficiency:
Techniques and Applications. Oxford: Oxford University Press.
Fries, Steven, and Anita Taci. 2005. Cost efficiency of banks in transition: Evidence from 289 banks in
15 post-communist countries. Journal of Banking & Finance 29: 55–81. [CrossRef]
Fukuyama, Hirofumi, and Roman Matousek. 2011. Efficiency of Turkish banking: Two-stage network system.
Variable returns to scale model. Journal of International Financial Markets, Institutions and Money 21: 75–91.
[CrossRef]
Goddard, John, Phil Molyneux, and John O. S. Wilson. 2004. The profitability of European banks: A cross-sectional
and dynamic panel analysis. The Manchester School 72: 363–81. [CrossRef]
Grigorian, David A., and Vlad Manole. 2006. Determinants of commercial bank performance in transition:
An application of data envelopment analysis. Comparative Economic Studies 48: 497–522. [CrossRef]
Grosskopf, Shawna. 1996. Statistical inference and nonparametric efficiency: A selective survey. Journal of
Productivity Analysis 7: 161–76. [CrossRef]
Hadad, Muliaman D., Maximilian J. B. Hall, Karligash A. Kenjegalieva, Wimboh Santoso, and Richard Simper.
2011a. Banking efficiency and stock market performance: An analysis of listed Indonesian banks. Review of
Quantitative Finance and Accounting 37: 1–20. [CrossRef]
Economies 2019, 7, 13 22 of 23

Hadad, Muliaman D., Maximilian J. B. Hall, Karligash A. Kenjegalieva, Wimboh Santoso, and Richard Simper.
2011b. Productivity changes and risk management in Indonesian banking: A Malmquist analysis.
Applied Financial Economics 21: 847–61. [CrossRef]
Hasan, Iftekhar, and Katherin Marton. 2003. Development and efficiency of the banking sector in a transitional
economy: Hungarian experience. Journal of Banking & Finance 27: 2249–71. [CrossRef]
Heffernan, Shelagh A., and Xiaoqing Fu. 2010. Determinants of financial performance in Chinese banking.
Applied Financial Economics 20: 1585–600. [CrossRef]
Honohan, Patrick, and Daniela Klingebiel. 2003. The fiscal cost implications of an accommodating approach to
banking crises. Journal of Banking & Finance 27: 1539–60. [CrossRef]
Jiang, Chunxia, Genfu Feng, and Dirk Willenbockel. 2007. WTO challenges and efficiency of Chinese banks
AU—Yao, Shujie. Applied Economics 39: 629–43. [CrossRef]
Kaparakis, Emmanuel I., Stephen M. Miller, and Athanasios G. Noulas. 1994. Short-run cost inefficiency of
commercial banks: A flexible stochastic frontier approach. Journal of Money, Credit and Banking 26: 875–93.
[CrossRef]
Kwack, Sung Yeung. 2000. An empirical analysis of the factors determining the financial crisis in Asia. Journal of
Asian Economics 11: 195–206. [CrossRef]
Lovell, C. A. Knox, Jesús T. Pastor, and Judi A. Turner. 1995. Measuring macroeconomic performance in the
OECD: A comparison of European and non-European countries. European Journal of Operational Research 87:
507–18. [CrossRef]
Lozano-Vivas, Ana, Jesus T. Pastor, and José M. Pastor. 2002. An efficiency comparison of European banking
systems operating under different environmental conditions. Journal of Productivity Analysis 18: 59–77.
[CrossRef]
Maddala, Gangadharrao S., and Shaowen Wu. 1999. A comparative study of unit root tests with panel data and a
new simple test. Oxford Bulletin of Economics and Statistics 61: 631–52. [CrossRef]
Manlagñit, Maria Chelo V. 2011. Cost efficiency, determinants, and risk preferences in banking: A case of stochastic
frontier analysis in the Philippines. Journal of Asian Economics 22: 23–35. [CrossRef]
Margono, Heru, Subhash C. Sharma, and Paul D. Melvin. 2010. Cost efficiency, economies of scale, technological
progress and productivity in Indonesian banks. Journal of Asian Economics 21: 53–65. [CrossRef]
Matthews, Kent, and Mahadzir Ismail. 2006. Efficiency and Productivity Growth of Domestic and Foreign Commercial
Banks in Malaysia. Cardiff: Cardiff University.
Mester, Loretta J. 1996. A study of bank efficiency taking into account risk-preferences. Journal of Banking & Finance
20: 1025–45.
Mia, Md Aslam, Lucia Dalla Pellegrina, Patrick Van Damme, and Mahinda Wijesiri. 2018. Financial Inclusion,
Deepening and Efficiency in Microfinance Programs: Evidence from Bangladesh. The European Journal of
Development Research. [CrossRef]
Molyneux, Philip. 1993. Structure and Performance in European Banking. Bangor: University of Wales.
Molyneux, Philip, Linh H. Nguyen, and Ru Xie. 2013. Foreign bank entry in South East Asia. International Review
of Financial Analysis 30: 26–35. [CrossRef]
Noman, Abu Hanifa Md, Chan Sok Gee, and Che Ruhana Isa. 2017. Does competition improve financial stability
of the banking sector in ASEAN countries? An empirical analysis. PLoS ONE 12: e0176546. [CrossRef]
[PubMed]
Noman, Abu Hanifa Md, Chan Sok Gee, and Che Ruhana Isa. 2018. Does bank regulation matter on the
relationship between competition and financial stability? Evidence from Southeast Asian countries.
Pacific-Basin Finance Journal 48: 144–61. [CrossRef]
Nurboja, Bashkim, and Marko Košak. 2017. Banking efficiency in South East Europe: Evidence for financial crises
and the gap between new EU members and candidate countries. Economic Systems 41: 122–38. [CrossRef]
Parinduri, Rasyad A., and Yohanes E. Riyanto. 2014. Bank Ownership and Efficiency in the Aftermath of Financial
Crises: Evidence from Indonesia. Review of Development Economics 18: 93–106. [CrossRef]
Pastor, JoséManuel, Francisco Perez, and Javier Quesada. 1997. Efficiency analysis in banking firms:
An international comparison. European Journal of Operational Research 98: 395–407. [CrossRef]
Perry, Philip. 1992. Do banks gain or lose from inflation? Journal of Retail Banking 14: 25–31.
Qin, Xuezhi, and Dickson Pastory. 2012. Commercial Banks Profitability Position: The Case of Tanzania.
International Journal of Business & Management 7. [CrossRef]
Economies 2019, 7, 13 23 of 23

Schaeck, Klaus, and Martin Cihák. 2014. Competition, efficiency, and stability in banking. Financial Management
43: 215–41. [CrossRef]
Simar, Leopold, and Paul W. Wilson. 1998. Sensitivity analysis of efficiency scores: How to bootstrap in
nonparametric frontier models. Management Science 44: 49–61. [CrossRef]
Simar, Leopold, and Paul W. Wilson. 2007. Estimation and inference in two-stage, semi-parametric models of
production processes. Journal of econometrics 136: 31–64. [CrossRef]
Simar, Léopold, and Paul W. Wilson. 2011. Two-stage DEA: Caveat emptor. Journal of Productivity Analysis 36: 205.
[CrossRef]
Soedarmono, Wahyoe, Fouad Machrouh, and Amine Tarazi. 2013. Bank competition, crisis and risk taking:
Evidence from emerging markets in Asia. Journal of International Financial Markets, Institutions and Money 23:
196–221. [CrossRef]
Sufian, Fadzlan. 2009. Determinants of bank efficiency during unstable macroeconomic environment: Empirical
evidence from Malaysia. Research in International Business and Finance 23: 54–77. [CrossRef]
Sufian, Fadzlan. 2010. The impact of the Asian financial crisis on bank efficiency: The 1997 experience of Malaysia
and Thailand. Journal of International Development 22: 866–89. [CrossRef]
Sufian, Fadzlan, and M. Shah Habibullah. 2009. Do mergers and acquisitions leads to a higher technical and scale
efficiency? A counter evidence from Malaysia. African Journal of Business Management 3: 340–49.
Sufian, Fadzlan, and Muzafar Shah Habibullah. 2010. Developments in the efficiency of the Thailand banking
sector: A DEA approach. International Journal of Development Issues 9: 226–45. [CrossRef]
Tajgardoon, Gholamreza, Mehdi Behname, and Khosro Noormohamadi. 2012. Is Profitability as a result of Market
Power or Efficiency in Islamic Banking Industry. Economics and Finance Review 2: 1–7.
Thoraneenitiyan, Nakhun, and Necmi K. Avkiran. 2009. Measuring the impact of restructuring and
country-specific factors on the efficiency of post-crisis East Asian banking systems: Integrating DEA with
SFA. Socio-Economic Planning Sciences 43: 240–52. [CrossRef]
Tobin, James. 1958. Estimation of relationships for limited dependent variables. Econometrica 26: 24–36. [CrossRef]
Vu, Ha, and Daehoon Nahm. 2013. The determinants of profit efficiency of banks in Vietnam. Journal of the Asia
Pacific Economy 18: 615–31. [CrossRef]
Williams, Jonathan, and Nghia Nguyen. 2005. Financial liberalisation, crisis, and restructuring: A comparative
study of bank performance and bank governance in South East Asia. Journal of Banking & Finance 29: 2119–54.
[CrossRef]
World Bank. 2014. World Development Indicators 2014. Washington, DC: World Bank Publications, Available online:
http://databank.worldbank.org/data/home.aspx (accessed on 10 February 2019).
Chen, Xiaogang, Michael Skully, and Kym Brown. 2005. Banking efficiency in China: Application of DEA to
pre-and post-deregulation eras: 1993–2000. China Economic Review 16: 229–45.
Xue, Mei, and Patrick T. Harker. 1999. Overcoming the Inherent Dependency of DEA Efficiency Scores: A Bootstrap
Approach. Philadelphia: Wharton Financial Institutions Center, University of Pennsylvania. Unpublished
Working Paper.
Zhang, Tiantian, and Kent Matthews. 2012. Efficiency convergence properties of Indonesian banks 1992–2007.
Applied Financial Economics 22: 1465–78. [CrossRef]

© 2019 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access
article distributed under the terms and conditions of the Creative Commons Attribution
(CC BY) license (http://creativecommons.org/licenses/by/4.0/).