Browse > Article
http://dx.doi.org/10.5762/KAIS.2020.21.6.91

Inefficiencies and Productivity Change of Domestic Banks including Non-performing Loan with Normal Output after Financial Crisis  

Chang, Young-Jae (Division of Management, Injae University)
Yang, Dong-Hyun (Division of Management, Injae University)
Publication Information
Journal of the Korea Academia-Industrial cooperation Society / v.21, no.6, 2020 , pp. 91-102 More about this Journal
Abstract
This study constructed production frontiers of inputs and outputs in a sequential manner, measured inefficiencies by applying a non-radial sequential weighted Russell directional distance function to these frontiers, and analyzed Luenberg productivity indices and the contribution of each of input and output factor based on these distances. The results are as follows. First, the productivity of banks increased due to technical changes after the global financial crisis. Second, productivity growth decreased between 2009 and 2014 due to technical changes after the recession, as previous studies have shown that technology progressed before the global financial crisis but then largely decreased or remained the same thereafter. After 2014, the productivity of banks improved. This result may be due to both technology improvement after 10 years of stagnation and reduction of inputs and non-performing loans. Third, the 3.6% annual of productivity growth for 10 years was comprised of 1.77% household loans, 0.67% corporate loans, 0.98% manpower, 1.18% non-performing loans, -0.5% total deposits, and -1.25% securities. Finally, this study has limitations since it could not control risks such as capital structure and interest volatility.
Keywords
Sequential Production Frontier; Inefficiency; Weighted Russell Directional Distance; Productivity; Technical Change; Non-Performing Loan;
Citations & Related Records
Times Cited By KSCI : 2  (Citation Analysis)
연도 인용수 순위
1 S. Y. Lee, "Analysis of productivity change of korean bank", Asia-pacific Journal of Multimedia Services Convergent with Art, Humanities, and Sociology, Vol. 5, No. 11, pp.133-145, 2018.
2 J, H. Hong, B. H. Ko, "An empirical study on determinants of banks' performance", Journal of Industrial Economics and Business, Vol. 23, No. 2, pp.889-906, 2010.
3 S. Y. Lee, "Efficiency analysis of the Korean banking industry", Review of Accounting and Policy Studies, Vol.17, No.4, pp.249-276, 2012.
4 Y. W. Jeong, H. C. Chung, "The Interaction effects of CEO succession types and reasons on firm performance", Korean Journal of Business Administration, Vol. 27, No. 8, pp.1185-1205, 2014.
5 Y. J. Chang, D. H. Yang, "Efficiency and productivity change in the Korean banking industry during 2004-2013-A sequential malmquist-luenberger productivity index", Korea Business Review, Vol. 44, No. 1, pp.55-80, 2015. DOI: http://doi.org/10.17287/kmr.2015.44.1.55   DOI
6 S. H. Kim, "Analysis of efficiency and malmquist productivity index change of domestic commercial banks", Journal of Industrial Economics and Business Vol. 29, No. 6, pp.2077-2106, 2016.   DOI
7 R. W. Shephard, Theory of Cost and Production Function, Princeton: Princeton University Press, 1970, pp.322.
8 R. Fare, S. Grosskopf, D. W. Noh, "Characteristics of polluting technology: theory and practice". Journal of Econometrics, Vol. 126, No. 2, pp.469-492, 2005. DOI: https://doi.org/10.1016/j.jeconom.2004.05.010   DOI
9 Y. H. Chung, R. Fare, S. Grosskopf, " Productivity and undesirable outputs: A distance function approach", Journal of Environmental Management , Vol. 51, pp.239-240, 1997. DOI: https://doi.org/10.1006/jema.1997.0146
10 R. Fare, C, A. K. Lovel, "Measuring the technical efficiency of production", Journal of Economic Theory, Vol.19, pp.150-162, 1978.   DOI
11 H. Fukuyama, W. L. Weber, "Japanese banking inefficiency and shadow pricing", Mathematical and Computer Modelling, Vol. 71, pp.1854-1867, 2008. DOI: https://doi.org/10.1016/j.mcm.2008.03.004
12 K. H. Park, W. L. Weber, "A Note on efficiency and productivity growth in the Korean banking industry, 1992-2002", Journal of Banking & Finance, Vol. 30, pp.2371-2386, 2006. DOI: http://doi.org/10.1016/j.jbankfin.2005.09.013   DOI
13 C. P. Barros, S. Managi, R. Matousek, "The technical efficiency of the Japanese banks: Non-radial directional performance measurement with undesirable output", Omega, Vol. 40, pp.1-8, 2012. DOI: https://doi.org/10.1016/j.omega.2011.02.005   DOI
14 H. Fujii, S. Managi, R. Matousek. "Indian bank efficiency and productivity changes with undesirable outputs: A disaggregated approach", Journal of Banking & Finance, Vol. 38, pp.41-50, 2014. DOI: https://doi.org/10.1016/j.jbankfin.2013.09.022   DOI
15 I. C. Kim, H. C. Lee, K. H. Ahn, "A study on the efficiency of banking industry with the use of the directional technology distance function", Journal of Korean Economics Studies, Vol. 17, pp.199-299, 2006.
16 H. Tulkens, P. Vanden Eeckaut, "Non-parametric efficiency, progress and regress measures for panel data: methodological aspects," European Journal of Operational Research. Vol. 80, No. 3, pp.474-499, 1995. DOI: https://doi.org/10.1016/0377-2217(94)00132-V   DOI
17 Y. G. Lee. K. J. Park, S. M. Kang, "The efficiency & productivity of nation-wide and local banks in Korea: based on directional distance function analysis.", Journal of Korean National Economy, Vol. 27. pp.25-31, 2009
18 J. T. Pastor, C. A. K. Lovell, "A global malmquist productivity index.", Economics Letters. Vol. 88, pp. 266-271, 2005. DOI: https://doi.org/10.1016/j.econlet.2005.02.013   DOI
19 D. G. Luenberger, "Benefit functions and duality", Journal of Mathematical Economics, Vol. 21, pp.461-481, 1992.   DOI
20 D. H. Oh, A. Heshmati, "A sequential malmquist-luenberger productivity index: environmental sensitive productivity growth considering the progressive nature of technology", Energy Economics , Vol. 32, pp.1345-1355, 2010. DOI: https://doi.org/10.1016/j.eneco.2010.09.003   DOI
21 D, H. Yang, Y. J. Chang, "Analysis of influencing on inefficiencies of Korean banking industry using weighted russell directional distance model", Journal of Digital Convergence, Vol. 17, No. 5, pp.117-125, 2019. DOI: https://doi.org/10.14400/JDC.2019.17.5.117   DOI
22 G. D. Ferrier, C. A. K. Lovell, "Measuring cost efficiency in banking: econometric and linear programming evidence", Journal of Econometrics, Vol. 46, pp.229-24, 1990. DOI: https://doi.org/10.1016/0304-4076(90)90057   DOI
23 S. L. Park, I. S. Lee, "The technical efficiency and merger effects in Korean commercial banks", Journal of Money and Finance, Vol. 7, No. 2, pp.31-60, 2002.
24 L. Drake, "Efficiency and productivity change in UK banking," Applied Econometrics, Vol. 11, pp.557-571, 2001. DOI: http://doi.org/10.1080/096031001752236825
25 J. E. Strum, B. Williums, "Foreign bank entry, deregulation and bank efficiency: lesson from the Australian experience", Journal of Banking & Finance, Vol. 28, pp.1775-1799, 2004. DOI: https://doi.org/10.1016/j.jbankfin.2003.06.005   DOI
26 S. K. Lee, Y. J. Kwon, "The sources of productivity change in the Korean commercial banking industry ; A nonparametric malmquist approach", Journal of Money and Finance, Vol. 4, No. 2, pp.86-122, 1999.
27 H. Hahm, "Risk and cost efficiency of banks in Korea", Journal of Money & Finance, Vol. 26, No. 2, pp.147-184, 2012.
28 Financial Supervisory Service, Financial Statistics Information System, Financial Supervisory Service, 2009-2018.
29 B. H. Hong, S. Y. Choi, "Technical efficiency and returns to scale of Korean banks using non-parametric method", Korean Journal of Business Administration. Vol. 15, No. 1, pp. 235-249, 2002.
30 R.D. Banker, H, Chang, S. Y, lee, "Differential impact of Korean banking system reforms on productivity", Journal of Banking & Finance, Vol 34, pp.1450-1460, 2010.   DOI
31 C. H. Kim, "Analysis on financial intermediation efficiency and total productivity of banking in Korea", Productivity Review, Vol. 23, No. 2, pp.235-257, 2008.
32 K. Y. Lee, J. H. Nahm, "Productivity change and its determinants in the Korean banking industry", Financial Stability Studies, Vol. 13, No. 1, Korea Deposit Insurance Corporation(KDIC), pp.93-125, 2012.
33 E. G. Kang, S. A. Kim, "Measurement of productivity changes in Korean banking, 2007-2012. The Korean Research Association for the Business Education", Vol. 29, No.2, pp.24-44, 2015.
34 J. W. Hyun, "Measuring efficiency in Korean banking industry by window data envelopment analysis", Productivity Review, Vol. 26, No. 3, pp.139-156, 2012.   DOI
35 I. R. lee, W. G. Lee, "Determinants and impact on microeconomic performance of non-performing loans growth", Journal of Insurance and Finance , Vol. 2, No. 2, pp.3-37, 2018,