Banking system plays an important role in the economic development of any country. Domestic banks, which are the main components of the banking system, have to be efficient; otherwise, they may create obstacle in the process of development in any economy. This study examines the technical efficiency of the Malaysian domestic banks listed in the Kuala Lumpur Stock Exchange (KLSE) market over the period 2005–2010. A parametric approach, Stochastic Frontier Approach (SFA), is used in this analysis. The findings show that Malaysian domestic banks have exhibited an average overall efficiency of 94 percent, implying that sample banks have wasted an average of 6 percent of their inputs. Among the banks, RHBCAP is found to be highly efficient with a score of 0.986 and PBBANK is noted to have the lowest efficiency with a score of 0.918. The results also show that the level of efficiency has increased during the period of study, and that the technical efficiency effect has fluctuated considerably over time.

The stock market is considered essential for economic growth and expected to contribute to improved productivity. An efficient pricing mechanism of the stock market can be a driving force for channeling savings into profitable investments and thus facilitating optimal allocation of capital. This study investigated the technical efficiency of selected groups of companies of Bangladesh Stock Market that is the Dhaka Stock Exchange (DSE) market, using the stochastic frontier production function approach. For this, the authors considered the Cobb-Douglas Stochastic frontier in which the technical inefficiency effects are defined by a model with two distributional assumptions. Truncated normal and half-normal distributions were used in the model and both time-variant and time-invariant inefficiency effects were estimated. The results reveal that technical efficiency decreased gradually over the reference period and that truncated normal distribution is preferable to half-normal distribution for technical inefficiency effects. The value of technical efficiency was high for the investment group and low for the bank group, as compared with other groups in the DSE market for both distributions in time- varying environment whereas it was high for the investment group but low for the ceramic group as compared with other groups in the DSE market for both distributions in time-invariant situation.

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