Efficiency in the Malaysian Banking Industry

This paper aims to examine the efficiency of ten Malaysian anchor banks from 2001 to 2005, a period representing the first five years of the country's Financial Sector Master Plan (FSMP) which was aimed at developing a more resilient, competitive and dynamic financial system with the best practices, among others. This paper used data envelopment analysis and the Malmquist index to analyse the efficiency and productivity issues surrounding the industry. The results indicated that the FSMP did in fact stimulated efficiency growth in terms of technological innovation but did not seem to have much impact on the technical efficiency or scale efficiency. These findings suggest that there is still some catching-up for the inefficient banks in the sample to be more competitive in order to face a more liberalized and globalized environment in the years to come.