Loan Quality, Ownership and Efficiency of Indian Banks: A Bootstrap Truncated Regression Approach

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    Abstract

    Many prior studies on Indian banking efficiency have typically regressed nonparametric estimates of production efficiency on environmental variables in a two stage process. However, Simar and Wilson (2007, 2011) have demonstrated that the studies that use such conventional approaches are invalid due to complicated and unknown serial correlation among estimated efficiencies. Using the data envelopment analysis bootstrap procedure suggested by these authors, for the first time, we analyse the technical efficiency of Indian banks and regress the bootstrap scores on a set of environmental variables using a truncated regression. Banks that are on efficiency frontier as per conventional analysis are actually away from the frontier when bootstrap scores are used. Contrary to many prior studies, state ownership was found to have significant negative impact on efficiency.
    Original languageEnglish
    Pages (from-to)289-306
    Number of pages18
    JournalIndian Journal of Economics and Business
    Volume14
    Issue number2
    Publication statusPublished - 2015

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    Bootstrap
    Truncated regression
    Ownership
    Loans
    Serial correlation
    Technical efficiency
    Banking
    Data envelopment analysis
    Efficiency frontier
    State ownership
    Production efficiency

    Cite this

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    title = "Loan Quality, Ownership and Efficiency of Indian Banks: A Bootstrap Truncated Regression Approach",
    abstract = "Many prior studies on Indian banking efficiency have typically regressed nonparametric estimates of production efficiency on environmental variables in a two stage process. However, Simar and Wilson (2007, 2011) have demonstrated that the studies that use such conventional approaches are invalid due to complicated and unknown serial correlation among estimated efficiencies. Using the data envelopment analysis bootstrap procedure suggested by these authors, for the first time, we analyse the technical efficiency of Indian banks and regress the bootstrap scores on a set of environmental variables using a truncated regression. Banks that are on efficiency frontier as per conventional analysis are actually away from the frontier when bootstrap scores are used. Contrary to many prior studies, state ownership was found to have significant negative impact on efficiency.",
    keywords = "Indian banks, efficiency, truncated regression, bootstrap",
    author = "Suneeta SATHYE and Milind SATHYE",
    year = "2015",
    language = "English",
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    journal = "Indian Journal of Economics Business",
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    T1 - Loan Quality, Ownership and Efficiency of Indian Banks: A Bootstrap Truncated Regression Approach

    AU - SATHYE, Suneeta

    AU - SATHYE, Milind

    PY - 2015

    Y1 - 2015

    N2 - Many prior studies on Indian banking efficiency have typically regressed nonparametric estimates of production efficiency on environmental variables in a two stage process. However, Simar and Wilson (2007, 2011) have demonstrated that the studies that use such conventional approaches are invalid due to complicated and unknown serial correlation among estimated efficiencies. Using the data envelopment analysis bootstrap procedure suggested by these authors, for the first time, we analyse the technical efficiency of Indian banks and regress the bootstrap scores on a set of environmental variables using a truncated regression. Banks that are on efficiency frontier as per conventional analysis are actually away from the frontier when bootstrap scores are used. Contrary to many prior studies, state ownership was found to have significant negative impact on efficiency.

    AB - Many prior studies on Indian banking efficiency have typically regressed nonparametric estimates of production efficiency on environmental variables in a two stage process. However, Simar and Wilson (2007, 2011) have demonstrated that the studies that use such conventional approaches are invalid due to complicated and unknown serial correlation among estimated efficiencies. Using the data envelopment analysis bootstrap procedure suggested by these authors, for the first time, we analyse the technical efficiency of Indian banks and regress the bootstrap scores on a set of environmental variables using a truncated regression. Banks that are on efficiency frontier as per conventional analysis are actually away from the frontier when bootstrap scores are used. Contrary to many prior studies, state ownership was found to have significant negative impact on efficiency.

    KW - Indian banks

    KW - efficiency

    KW - truncated regression

    KW - bootstrap

    M3 - Article

    VL - 14

    SP - 289

    EP - 306

    JO - Indian Journal of Economics Business

    JF - Indian Journal of Economics Business

    SN - 0972-5784

    IS - 2

    ER -