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

Review of ownership structures and banking efficiency: Implication to ASEAN-5

Ownership structure is known as the distribution of equity with relation to votes, capital and the identity of equity owners (Holderness et al., 1999). Ownership structure served as an important element in corporate governance by influencing the type of incentives managers receives from the firm. This paper reviews recent studies on the effect of ownership structure on banking efficiency in the developing countries with the focus on ASEAN countries. Review of previous studies clearly indicates that types of ownerships did exert some influences towards the performance of the banks in terms of efficiency. Even though publicly-owned banks operated in an economically inefficiency environment, it is undeniable that the existence of publicly-owned banks are needed especially in economically less stable countries. This is because the government-owned banks or the state-owned banks can act as a catalyst to ensure the development of certain priority sectors that are believed to contribute to the long run economic growth of the countries. Besides that, the existence of state-owned banks and government-ownership is crucial for the countries to have a balance social and economic objective. In addition, countries need to encourage the entry for foreign participants into the banking sectors to improve the quality and availability of the financial services towards the domestic financial market (Levine, 1996). The entry will encourage domestic banks to compete more efficiently in terms of costs and profits in order to survive in this environment. The spillover effects in terms of technology brought by the foreign participant will enable the creation of a more modern banking environment in the host countries. Not only that, with a balance combination of state-, privately-, and foreign-owned banks, it is believed that the banking industry in the developing countries will be able to survive in the competitive environment while helping the government effectively implement the macroeconomics policies in the long run

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 demographic and loan size on the probabilities of women freedom of movement empowerment

The purpose of this paper is to evaluate the impact of microfinance involvement of women’s freedom of movement empowerment.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 from three districts namely district Bahawalpur, District Bahawalnagar and district Rahim Yar Kan of Division Bahawalpur, Pakistan.We used the multinomial logit model.The loan size increases women’s freedom of movement empowerment.This paper is intended to be a valuable contribution in term of socio- economic and political arena.This paper recommends that the future research should be done in other province of Pakistan, as there is cultural difference between Punjab, Sarhad and Baluchistan. In addition, the future research can examine the impact of socio cultural factors

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

Trade openness, economic growth and convergence: Evidence from selected Asian countries

It is argued that countries, which adopt an open economic policy, enjoy faster economic growth than countries which do not, suggesting that "trade openness" can spur economic growth. However, the issue is whether the positive impact of trade openness to economic growth varies across countries. Hence, the objective of this paper is to determine whether the effect of openness to trade on economic growth varies across the region in Asia. To achieve this objective, panel data regressions were employed to estimate the growth equation. Empirical result indicated that "trade openness" does have a positive effect on economic growth and the marginal benefit from improved openness is somewhat higher for East Asian Economies relative to other Asian economies

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

Tourism and economic growth in Malaysia: Evidence from tourist arrivals from ASEAN-5 countries

This paper examined the causal relationship between tourism and economic growth in Malaysia by using panel time-series approach. Results from the panel cointegration analysis suggest the existence of cointegration between international tourism receipts and real economic growth.Results of the panel causality test based on the error correction model show Granger causality running from international tourism receipts to real economic growth indicating the existence of both short- and long-run relationship between the two.The results provide evidence of the significance contribution of tourism industry to Malaysia's economic growth justifying the necessity of public intervention in providing tourism infrastructure and facilities