DEVELOPMENTS IN THE EFFICIENCY AND RETURNS TO SCALE OF THE KEY ASEAN ECONOMIES BANKING SECTORS
DOI:
https://doi.org/10.35631/AIJBES.829133Keywords:
ASEAN, Banks, Country Income Level, Data Envelopment Analysis, Returns to ScaleAbstract
How much of bank inefficiency in ASEAN reflects resource management, and how much is linked to operating at the wrong scale? This study examines this question for 189 commercial banks in Singapore, Malaysia, Thailand, Indonesia, the Philippines, and Vietnam over 2013–2021. We estimate an input-oriented Data Envelopment Analysis (DEA) frontier under constant returns to scale (CRS) and variable returns to scale (VRS) and use the non-increasing returns to scale (NIRS) specification to distinguish increasing from decreasing returns to scale. Thailand recorded the highest mean technical efficiency (0.599), while the Philippines recorded the lowest (0.348). Vietnam has the highest mean pure technical efficiency (0.795), whereas Malaysia has the strongest mean scale efficiency (0.913). At the income-group level used in this study, the middle-income banking sectors achieve a higher mean technical efficiency than the high- and low-income groups. Returns to scale are dominated by decreasing returns to scale: 1,235 of 1,523 bank-year observations are classified as DRS, compared with 88 under IRS and 200 at CRS. The pattern indicates that scale mismatch is an important source of inefficiency and that expansion is not equally appropriate for all banks. By placing the six banking systems on one frontier, this study provides a directly comparable view of efficiency and scale conditions across ASEAN before and during the COVID-19 period.
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