Cost efficiency and profitability in Thailand's life insurance industry: A stochastic cost frontier approach

Liberalized environments brought about by trade agreements and other restructuring of international markets under the General Agreement on Trade and Services (GATS) have increased market opportunities for foreign firms. This opening up of domestic market under GATS will cause the inflow of foreign insurance firm hence heighten competitive pressures. As such, insurance firm in Thailand need to be efficient to ensure their survival. Hence, the purpose of this paper is to evaluate the cost efficiency and its relationship with profitability in Thailand’s life insurance firms during the period 1997-2002 using the stochastic cost frontier approach. We find that the industry is on average 82 to 140 percent inefficient. There is no significant relationship between inefficiency and age. But, the mean inefficiency is negatively correlated with size suggesting the need for rationalization in the insurance industry in Thailand. Consolidating the large number of smaller insurers should be high on the government’s agenda, and the capital requirements for life insurers need to be increase. We show that inefficiency is negatively correlated with ROE and ROA ratios. This shows that efficient firms, on average, have higher return on equity and on assets. This indicates that inefficiency has substantial effect on the profitability of life insurance companies

Information technology and cost efficiency in Malaysian banking industry

It is argued that information technology can increase cost efficiency of banks by offering opportunities to substitute across inputs into production – for example, to substitute computer technology and information networks for labor. Hence, the transition to a knowledge-based financial sector would lead to banks becoming more competitive, more cost effective and better able in managing risks. As such, those banks that failed to make this transition are less able to compete as they lack the capability to innovate and face higher delivery costs. The main objectives of this paper are to determine the impact of IT on banking efficiency and its economies of scale using a sample of Malaysian banks. To achieve these objectives, stochastic cost frontier method is employed to estimate bank efficiency and panel data approach were used to examine the impact of IT on bank efficiency. The results indicate that the impact of IT on bank efficiency increases with increase in bank size, hence further supporting the process of bank mergers that are currently undertaken in the Malaysian banking industry

Impact of interaction term between education and loan size on women’s decision making

The purpose of this paper is to evaluate the impact of the microfinance involvement of women’s household decision making.The cross sectional data for this study is collected by using questionnaires.Using random sampling, 744 households are selected from female clients of Khushhali Bank and National Rural Support Program in Bahawalpur Division, Pakistan. We used the multinomial Logit and multinomial Probit model.The results show the woman's borrowers are more empower than women no borrowers.The coefficient of the loan size increases woman's household making empowerment. This paper is intended to be a valuable contribution in term of socio- economic and political arena

Total factor productivity growth, technical change, and technical efficiency in ASEAN Countries

This paper analyzes productivity growth in five ASEAN countries over the period 1978-1990. A Malmquist-Data-Envelopment Analysis (DEA) method as introduced by Fare, Grosskopf, Norris, and Zhang (1994) is used to calculate indices of productivity change and its components, technological change, technical eficiency change, and scale eficiency change. Results suggest that, on average, ASEAN countries productivity growth had been declining at a negative rate of 0.5 percent over the study period,mainly due to deterioration in efficiency with which existing technology is utilized rather than a lack of innovation or technological change. The results also show that Singapore is the most efficient economy in the region, while Philippines is the least efficient

Efficiency of foreign banks: Evidence from selected (Association of Southeast Asian Nations) ASEAN countries

This study examined foreign banks efficiency in selected ASEAN countries (Indonesia, Malaysia, the Philippines, and Thailand) for the period of 2001 to 2008 by using the parametric stochastic frontier analysis (SFA) approach.The results indicate that foreign banks originating from developed countries are more cost and profit efficient as compared to foreign banks from developing countries.The results also show that foreign banks in Malaysia are the most cost and profit efficient while foreign banks in Indonesia are the least.The result is consistent with the difference in index of economic freedom over the years between the countries studied.Hence, to attract foreign banks into the ASEAN countries, authorities should liberalize their banking sector.Less restrictive banking sector will allow healthy competition between foreign and local banks in the developing countries resulting in higher overall banking industry efficiency

Information tehnology and cost efficiency in Malaysian banking industry

It is argued that information technology can increase cost efficiency of banks by offering opportunities to substitute across inputs into production – for example, to substitute computer technology and information networks for labor. Hence, the transition to a knowledge-based financial sector would lead to banks becoming more competitive, more cost effective and better able in managing risks. As such, those banks that failed to make this transition are less able to compete as they lack the capability to innovate and face higher delivery costs. The main objectives of this paper are to determine the impact of IT on banking efficiency and its economies of scale using a sample of Malaysian banks. To achieve these objectives, stochastic cost frontier method is employed to estimate bank efficiency and panel data approach were used to examine the impact of IT on bank efficiency. The results indicate that the impact of IT on bank efficiency increases with increase in bank size, hence further supporting the process of bank mergers that are currently undertaken in the Malaysian banking industry

Peer effects, financial decisions and industry concentration: A review

Purpose- This article reviews literature related to peer effects and different financial decisions. It further summarizes the theory and motives that drive peer effects. Also, the study highlights the influence of industry concentration on peer interaction in financial decision making. This content analysis of scantily available peer effect literature has been performed to highlight the significance of peer effects in financial decision making like investment, cash holding, leverage and many more. Most of the existing peer effects literature focuses on the U.S. However, peer effects also occur in other countries but empirical evidence is comparatively limited. But, managers may take into consideration their industry peers especially if their firms are operating in highly competitive environments. Design/Methodology- Content analysis approach is applied to review prevailing financial literature on peer interactions and financial decisions with a special focus on industry concentration in explaining the peer effects.Practical Implications- As the prime focus of managerial decisions is to maximize the firm’s value. Hence, information about peers would be helpful in making better decisions, especially in highly competitive environments. Also, this review of selected literature provides pathways for future research in investigating the motives of peer effects

Does AFTA and China's entry into WTO affect FDI in ASEAN countries?

Foreign direct investment (FDI) plays an important role in the rapid economic development of the newly industrializing and developing economies of Southeast Asia. In terms of the regions attractiveness, ASEAN region is a leading recipient of FDI flows in the developing world, with five ASEAN countries in the top 20 developing-countries recipients of long-term global capital flows from 1997 to 1998. While the creation of AFTA may help FDI inflows to ASEAN countries, China's entry into World Trade Organization (WTO) will be the opposite and has caused a great deal of worry to ASEAN countries. The objective of this paper is to empirically determine the effect of ASEAN Free Trade Area (AFTA) and China's entry into WTO on the inflows of FDI into ASEAN countries. To achieve the objectives, Seemingly Unrelated Regression (SUR) method was used to estimate the FDI equation. In general, the results indicate that the establishment of AFTA had a positive effect on FDI inflows to ASEAN countries while China's entry into WTO is the opposite