The present study employs the state of the art bias-corrected Malmquist Productivity Index method to examine the sources of efficiency and productivity of the foreign and domestic banks operating in the Malaysian banking sector. The preferred methodology enables us to isolate efforts to catch up to the frontier (efficiency change) from shifts in the frontier (technological change [TECHCH]). The results indicate that the Malaysian banking sector has exhibited productivity progress mainly attributed to technological progress. The empirical findings suggest that both the domestic and foreign banks have exhibited productivity progress albeit at different quantum attributed mainly to progress in TECHCH.
banks total factor productivity bootstrap Malmquist Productivity Index Malaysia