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Trends in the efficiency of Singapore's commercial banking groups: A non-stochastic frontier DEA window analysis approach

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Abstract:

Purpose ‐ The purpose of this paper is to examine the long-term trend in the efficiency of the Singapore banking sector. Design/methodology/approach ‐ The paper utilises the data envelopment analysis (DEA) window analysis methodology, which allows us to distinguish between three different types of efficiency namely, technical, pure technical and scale efficiencies. Given that the sample population is small, the DEA window analysis allows for a greater degree of freedom to the sample. The paper further examines whether the Singapore banking groups were drawn from the same environment during two sub-periods by performing a series of parametric and non-parametric tests. Finally, the paper attempts to investigate the consistency of the estimated DEA efficiency scores by examining its relationship with the traditional measures of banks' performance. Findings ‐ During the period of study, the results suggest that the Singapore banking groups have exhibited mean overall or technical efficiency of 88.4 per cent. It was found that the Singapore banking groups' overall efficiency was on a declining trend during the earlier part of the studies, before increasing dramatically during the later period. Research limitations/implications ‐ The paper could be extended to consider the production approach along with the intermediation approach, which has been applied in this paper. Investigation of changes in productivity over time as a result of technical change or technological progress or regress by employing the Malmquist Total Factor Productivity Index, could be another extension to the paper. Originality/value ‐ This paper provides new empirical evidence on the long-term trends in the efficiency of the Singapore banking groups.

Keywords: Banking; Banks; Process efficiency; Singapore

Document Type: Research Article

DOI: http://dx.doi.org/10.1108/17410400710722626

Publication date: January 23, 2007

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