Cost efficiency in South Asian banking: The impact of bank size, state ownership and stock exchange listings*

This study examines the cost efficiency performance of 111 commercial banks in Bangladesh, India, Pakistan and Sri Lanka over 1997-2004. The primary focus is to assess whether bank size, state ownership and stock exchange listing have significant effects on South Asian banks' efficiency performance. To this end, a translog-form composite-error cost efficiency model, which allows for exogenous environmental influences, is estimated. The results indicate that the overall efficiency of South Asian banks declined over 1997-2004. Larger banks and banks with widespread ownership through stock exchange listings were found to be relatively more cost efficient. In contrast, state-owned banks were less efficient.