Determinants of Allocative, Cost and Scope Efficiencies : A Comparative Analysis of Banks and Insurance Companies in Pakistan

The purpose of this research paper is to empirically investigate determinants of allocative, cost and scope efficiencies as well as the impact of the financial crisis and stock market performance on efficiencies. Pakistan's banks and insurance companies' sector were taken for the purpose of comparative analysis. For this objective, both Islamic/takaful and conventional sectors were occupied. Twelve years of data (2007-2018) of PSX's banking and insurance sector was taken. Two-stage non-parametric efficiency analysis was done, in the first stage, estimation for efficiency scores we used DEA for both sectors. In the second phase, efficiency scores are regressed on the selected determinants by Tobit Regression. For measuring stock market performance CASR is calculated. Inadequate efficiency in the insurance sector is evidenced by the banking sector. The efficiency of takaful firms as new entrants of the market was not good compared to conventional insurance firms. Islamic and conventional banks are operated at almost the same efficiency level. Performance of the stock market has an inverse and both (significant and insignificant) relationship with efficiency, which means different events and fundamentals don't affect the performance of sectors. As well as determinants have different relationships with allocative, cost and scope efficiencies scores