Investigating The Effect Of Non-Performing Loans On Technical Efficiency In Malaysian Banking Sector

• Main Authors: Hussin, SAS (Author), Khaki, SSM (Author), Mohammed, NI (Author), Ramli, NA (Author)
• Format: Article
• Language: English
• Published: 2018
• Subjects: Conventional banks; DETERMINANTS; effectiveness; efficiency; Islamic banks
• Online Access: View Fulltext in Publisher
• DOI: 10.1063/1.5045414

This study investigates the issues of non-performing loans (NPL) on technical efficiency in the Malaysian banking sector. This study aims to estimate the technical efficiency of banking performance in Malaysia and also to determine the effect of non-performing loans on bank efficiency in Malaysia. The technical efficiency was estimated using the Slack-based measure approach while the Tobit regression model is employed to determine the effect of NPL on bank efficiency. The results indicate that the technical efficiency score of commercial foreign banks is better than commercial domestic banks, while the Tobit regression results show that non-performing loans give negative and statistically significant impact to commercial domestic banks.