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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...

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Main Authors: Abd Karim, Mohd Zaini, Anuar, Abdul Rahim, Mohd Khan, Shazida Jan
Format: Article
Language:English
Published: Universiti Utara Malaysia 2003
Subjects:
HG Finance
T Technology (General)
Online Access:http://repo.uum.edu.my/2997/1/mmj725.pdf
http://repo.uum.edu.my/2997/
http://mmj.uum.edu.my
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spelling my.uum.repo.29972020-11-05T02:43:53Z http://repo.uum.edu.my/2997/ Information technology and cost efficiency in Malaysian banking industry Abd Karim, Mohd Zaini Anuar, Abdul Rahim Mohd Khan, Shazida Jan HG Finance T Technology (General) 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. Universiti Utara Malaysia 2003 Article PeerReviewed application/pdf en http://repo.uum.edu.my/2997/1/mmj725.pdf Abd Karim, Mohd Zaini and Anuar, Abdul Rahim and Mohd Khan, Shazida Jan (2003) Information technology and cost efficiency in Malaysian banking industry. Malaysian Management Journal, 7 (2). pp. 47-58. ISSN 0128-6226 http://mmj.uum.edu.my
institution Universiti Utara Malaysia
building UUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Utara Malaysia
content_source UUM Institutional Repository
url_provider http://repo.uum.edu.my/
language English
topic HG Finance
T Technology (General)
spellingShingle HG Finance
T Technology (General)
Abd Karim, Mohd Zaini
Anuar, Abdul Rahim
Mohd Khan, Shazida Jan
Information technology and cost efficiency in Malaysian banking industry
description 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.
format Article
author Abd Karim, Mohd Zaini
Anuar, Abdul Rahim
Mohd Khan, Shazida Jan
author_facet Abd Karim, Mohd Zaini
Anuar, Abdul Rahim
Mohd Khan, Shazida Jan
author_sort Abd Karim, Mohd Zaini
title Information technology and cost efficiency in Malaysian banking industry
title_short Information technology and cost efficiency in Malaysian banking industry
title_full Information technology and cost efficiency in Malaysian banking industry
title_fullStr Information technology and cost efficiency in Malaysian banking industry
title_full_unstemmed Information technology and cost efficiency in Malaysian banking industry
title_sort information technology and cost efficiency in malaysian banking industry
publisher Universiti Utara Malaysia
publishDate 2003
url http://repo.uum.edu.my/2997/1/mmj725.pdf
http://repo.uum.edu.my/2997/
http://mmj.uum.edu.my
_version_ 1684655778808463360
score 13.211869

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