Market Concentration, Risk-taking, and Efficiency of Commercial Banks in Pakistan: An Application of the Two-Stage Double Bootstrap DEA

Abstract

Efficiency analysis is a vital part of prudent management practices across the banking industry, yet there is only sparse literature examining bank efficiency, especially in Asian developing countries and using a comprehensive methodology. This study aims to analyze bank efficiency in a South Asian developing country, Pakistan, for the period 2007 to 2014. Borrowing a technique from Simar and Wilson (2007), this study applies two-stage data envelopment analysis (DEA) with double bootstrapping. Our results reveal that private banks are more technically efficient than government banks; conventional commercial banks precede Islamic commercial banks in efficiency, and large banks are more technically efficient than small and medium-size banks. Moreover, the results indicate that market concentration, capital risk, credit risk, and liquidity risk have significant effects on the overall efficiency of banks. This study provides an important opportunity to advance the understanding of bank efficiency, market concentration, and risk complications in developing countries and gives insightful directions to researchers and financial institutions.

Real Estate Sector Efficiency Analysis

“…Estas evidencian como, las polí� cas macroeconómicas de un país son un factor crí� co para determinar la efi ciencia de un sector empresarial. A su vez (Khan, et al, 2018) establecieron un modelo para medir y evaluar la produc� vidad de empresas manufactureras, evidenciando como existe una relación signifi ca� va entre la concentración de oferentes de un sector y su efi ciencia operacional, infi riéndose que dicha concentración puede generar economías de escala que redunden en procesos más efi cientes. Chen & Jia (2017) demuestran como los factores ambientales afectan la efi ciencia de las regiones en China, determinando que los temas ambientales son una restricción para la consecución de obje� vos corpora� vos a largo plazo.…”

“…El sector inmobiliario representa el 4.5% del PIB en Colombia y genera alrededor de 1.8 millones de empleos, de esta forma, el buen desempeño del sector � ene un impacto directo en el desarrollo de la economía del país. Es así como, desde el punto de vista organizacional es importante contar con estudios que permiten conocer, analizar y diagnos� car la efi ciencia del sector para la promoción de toma de decisiones obje� vas (Khan, et al, 2018;Ngo & Tsui, 2020).…”

Determinants of Allocative, Cost and Scope Efficiencies: A Comparative Analysis of Banks and Insurance Companies in Pakistan

“…The Pakistan's insurance sector has undoubtedly a massive potential which has not been realized as yet (SBP). Khan et al, (2018) government banks are less technically efficient than private banks; small and medium-size banks are less technically efficient than large banks and in efficiency Islamic commercial banks follow conventional commercial banks. Qureshi & Shaikh, (2012) Islamic bank is less revenue efficient and more cost efficient.…”

Navigating board dynamics: Configuration analysis of corporate governance’s factors and their impact on bank performance

“…Pakistan's financial sector is consisted of bank and non-bank financial intermediaries. Bank intermediaries include commercial banks, Islamic banks, specialty banks, and microfinance banks [6,7]. Non-bank intermediaries include companies that provide insurance, non-bank financial institutions, and development finance groups [8].…”