The Impact of the Global Financial Crisis on Australian Banking Efficiency

Milind SATHYE, Mohamed Ariff, Viverita NA

    Research output: Contribution to journalArticle

    Abstract

    The theory of financial stability postulates that financial institutions in a country experiencing financial crisis would witness productivity losses. This study examined whether they experience productivity losses when there is no crisis, and whether the financial sector is not immune from global economic events. The Australian financial institution efficiency and productivity during 1999-2009 were examined, that is, after the financial system reforms but the test period includes the financial crisis years. Efficiency scores were computed using Stochastic Frontier Analysis and total factor productivity using Malmquist indices. Australian institutions were found to have experienced productivity decline during the global financial crisis. The evidence is just the opposite of the common belief that Australian institutions remained insulated from the crisis. Global economic slowdown can also lead to productivity losses in a country not experiencing severe financial crisis because of the reforms taken long before the crisis to improve prudential oversight of the financial institutions in Australia.
    Original languageEnglish
    Pages (from-to)1-22
    Number of pages22
    JournalInternational Journal of Banking and Finance
    Volume12
    Issue number2
    Publication statusPublished - 2016

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    Global financial crisis
    Productivity
    Banking
    Financial crisis
    Financial institutions
    Economics
    Financial stability
    Malmquist index
    Common belief
    Financial sector
    Financial system
    Stochastic frontier analysis
    Total factor productivity
    Oversight

    Cite this

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    abstract = "The theory of financial stability postulates that financial institutions in a country experiencing financial crisis would witness productivity losses. This study examined whether they experience productivity losses when there is no crisis, and whether the financial sector is not immune from global economic events. The Australian financial institution efficiency and productivity during 1999-2009 were examined, that is, after the financial system reforms but the test period includes the financial crisis years. Efficiency scores were computed using Stochastic Frontier Analysis and total factor productivity using Malmquist indices. Australian institutions were found to have experienced productivity decline during the global financial crisis. The evidence is just the opposite of the common belief that Australian institutions remained insulated from the crisis. Global economic slowdown can also lead to productivity losses in a country not experiencing severe financial crisis because of the reforms taken long before the crisis to improve prudential oversight of the financial institutions in Australia.",
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    The Impact of the Global Financial Crisis on Australian Banking Efficiency. / SATHYE, Milind; Ariff, Mohamed; NA, Viverita.

    In: International Journal of Banking and Finance, Vol. 12, No. 2, 2016, p. 1-22.

    Research output: Contribution to journalArticle

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