A stochastic cost frontier model allowing for heteroskedasticity was applied to a panel data set composed of the observations from thirty-five commercial banks during 1994-2004. The empirical results show that the ratio of small and medium business loans, total assets, number of ATMs, and overdue loan ratio had a negative effect on banks’ efficiency.The variables of operating profit margin, loans to deposits ratio, numbers of IC cards and equity ratio had a positive effect on banks’ efficiency.
Moreover, those banks with higher degrees of financial leverages and overdue loan ratios would have a igher risk of costs while those banks with higher ratios of capital adequacy, net investments, and fees and commission revenues would have a lower risk of costs.
Relation:
Asian Journal of Management and Humanity Sciences 1(3):404-421
