Productive efficiency of banks in ASEAN countries

Abstract

This study examines the determinants of productive efficiency of banks operating in 8 member countries of the Association of Southeast Asian Nations (ASEAN). This study uses the economic theory approach to examine the existence of economies of scale on the ASEAN banking market, especially its impact on cost efficiency. The author applies a concept of average cost (AC) as a proxy for the productive efficiency. He finds that economies of scale exist on the banking market and economies of scale and scope should be considered in the industrial policy. Stronger capital position is also positive to banks' efficiency and means that stronger capitalized banks are more efficient. Bank that remunerates better tends to be more efficient as a result of economic capital effect.