MEASURING PRODUCTIVITY AND EFFICIENCY OF THE PHILIPPINE BANKS, 1998-2003: AN APPLICATION OF SFA APPROACH

This paper presents efficiency measures using production efficiency factors, covering performance of Philippine banks over the period 1998-2003. This period is crucial to the growth of the Philippine banking industry, in view of the challenges faced as a result of the Asian crisis of 1997. Utilizing the Stochastic Frontier Analysis (SFA), the authors investigate whether the age, size and ownership of the banks determine their technical inefficiencies. The authors find that the older banks are more technically inefficient than the younger banks. On the size of the banks, the result shows that bigger banks are more efficient than the smaller banks. The results also indicate that state banks are more technically efficient than private banks. The study also reveals that the technical inefficiencies in the Philippine banks are significantly affected by firm-specific variables such as age, size and ownership.