Determinants of Operational Efficiency and Total Factor Productivity Change of Major Cambodian Financial Institutions : A Data Envelopment Analysis during the Period of 2006-2013

This study is the first attempt to estimate the determinants of the operational efficiency and total factor productivity (TFP) change of major financial institutions in Cambodia during the period 2006 to 2013. The technical efficiency score and the TFP change were measured using conventional data envelopment analysis (DEA) and the Malmquist index, and these obtained indexes were then regressed to find their determinants. The empirical results obtained reveal that the efficiency of large institutions is higher and more stable than that of small institutions, and the efficiency of domestic institutions is better than that of their foreign counterparts. Furthermore, institutions that are more resilient and operationally stable can generate profits more efficiently, and institutions that are more diversified are more efficient. It was also observed that sound and diversified institutions tend to increase their total factor productivity, and some exogenous factors, such as increased household reserves of financial assets and improved economic infrastructure, contributed to the improvement of productivity change. These observations suggest that further improvement of Cambodian financial institutions requires an increase in operational capacity, appropriate selection of foreign ownership, enhanced soundness of management, and greater diversification.