The causes of productivity change in GCC banking industry

What is it about?

Purpose: The purpose of this paper is to examine historic rates of productivity change in Arab GCC banks. The paper planned to answer the following research questions: How did productivity develop during the period 1993-2002? What was the cause for this change? Design/methodology/approach: Using data of 52 banks over ten years, total factor productivity (TFP) changes were calculated using the Malmquist DEA. The Malmquist DEA productivity index measures the ratio of two distance functions pertaining to distinct time periods. Findings: The Malmquist DEA slight downward shift in average efficiency of the banks in the sector during 1993 to 2002, stemming from change in the technical efficiency of banks (catching up effect), and technology equally decreasing during the period. Looking at the behaviour of total assets, deposits, and loans, the results revealed that there was a downward trend in total of assets, deposits, and loans. Research limitations/implications: These findings may have been a temporary effect, evident during the sampled period only. To draw firmer conclusions a longer sample period is needed. Originality/value: Studies of production performance in the developed economies banking are commonplace, however, to the researcher’s knowledge, there has been no study conducted for GCC economies. In fact, this study is pioneer for the region in using pooled data of the six GCC countries to measure productivity change for ten years.

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