Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of San Francisco
Working Paper Series
The X-efficiency of commercial banks in Hong Kong
Simon H. Kwan

This paper uses the stochastic econometric cost frontier approach to investigate the cost efficiency of commercial banks in Hong Kong. On average, the X-efficiency of Hong Kong banks is found to be about 16 to 30 percent of observed total costs, which is comparable to the findings in the U.S. banking industry. X-efficiency is found to decline over time, indicating that banks in Hong Kong are now operating closer to the cost frontier than before. This is consistent with technological innovation that might have occurred in the Hong Kong banking industry. Furthermore, the average large bank in Hong Kong is found to be less efficient than the average small bank, particularly during the earlier time periods. Finally, X-efficiency is found to be related to certain bank characteristics. Specifically, X-efficiency is found to decline with bank size, deposit-to-asset ratio, loan-to-asset ratios, provision for loan loss, and loan growth, and to increase with off-balance sheet activities.

Download Full text
Cite this item
Simon H. Kwan, The X-efficiency of commercial banks in Hong Kong, Federal Reserve Bank of San Francisco, Working Paper Series 2002-14, 2001.
More from this series
JEL Classification:
Subject headings:
Keywords: Hong Kong ; Banks and banking - Asia
For corrections, contact Noah Pollaczek ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal