Efficiency of the Banking Industry Structure in Korea

This paper analyzes whether the efficiency of the Korean banking industry has improved since the bank restructuring in 1997, and whether a bank with high efficiency has a larger market share. This paper uses an efficient structure hypothesis model to examine the relationship between the banks'...

Full description

Saved in:
Bibliographic Details
Published inAsian economic journal Vol. 25; no. 4; pp. 355 - 373
Main Authors Shin, Dong Jin, Kim, Brian H. S.
Format Journal Article
LanguageEnglish
Published Melbourne, Australia Blackwell Publishing Asia 01.12.2011
Blackwell Publishing Ltd
Subjects
bank efficiency
Banking industry
Banks
Data envelopment analysis
Efficiency
F33
G15
G21
Heckman selection two-step method
Market shares
Profitability
Studies
Korea
Online AccessGet full text

Cover

More Information
Summary:This paper analyzes whether the efficiency of the Korean banking industry has improved since the bank restructuring in 1997, and whether a bank with high efficiency has a larger market share. This paper uses an efficient structure hypothesis model to examine the relationship between the banks' efficiencies and their profitability. The data envelopment analysis method is applied to measure the efficiency and profitability of the banking industry in order to minimize possible bias due to the inflow of public funds for the bank consolidation. The two‐step Heckman selection method is used to correct for survivorship bias in the model. The derived result indicates that banks with higher efficiencies tend to record higher profit. Moreover, higher pure technological efficiency and scale efficiency have a positive effect on a bank's market share and concentration.
Bibliography:Shin: Economic Analysis Division, National Assembly Budget Office, 1 Uisadang-ro (Yeouido-dong), Yeongdeungpo-gu, Seoul 150-010, Korea. Email: shindj@nabo.go.kr. Kim (corresponding author): Department of Agricultural Economics and Rural Development, Program in Regional Information, Seoul National University, 1 Gwanangno, Gwanak-gu, Seoul 151-742, Korea. Email: briankim66@snu.ac.kr. We would like to acknowledge an anonymous referee and the editorial team for helpful comments and support.
ArticleID:ASEJ2066
istex:9C8CE48E707A63DCC2155BCB9264CABA716D152F
ark:/67375/WNG-BC2Q33GL-1
We would like to acknowledge an anonymous referee and the editorial team for helpful comments and support.
briankim66@snu.ac.kr
shindj@nabo.go.kr
Kim (corresponding author): Department of Agricultural Economics and Rural Development, Program in Regional Information, Seoul National University, 1 Gwanangno, Gwanak‐gu, Seoul 151‐742, Korea. Email
Shin: Economic Analysis Division, National Assembly Budget Office, 1 Uisadang‐ro (Yeouido‐dong), Yeongdeungpo‐gu, Seoul 150‐010, Korea. Email
ISSN:1351-3958
1467-8381
DOI:10.1111/j.1467-8381.2011.02066.x