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The Impact of the Global Financial Crisis on Australian Banking Efficiency
Sathye, M1, Mohamed Ariff2, Viverita3.
The theory of financial stability postulates that financial institutions in a
country experiencing financial crisis would witness productivity losses. This
study examined whether they experience productivity losses when there is no
crisis, and whether the financial sector is not immune from global economic
events. The Australian financial institution efficiency and productivity during
1999-2009 were examined, that is, after the financial system reforms but the
test period includes the financial crisis years. Efficiency scores were computed
using Stochastic Frontier Analysis and total factor productivity using Malmquist
indices. Australian institutions were found to have experienced productivity
decline during the global financial crisis. The evidence is just the opposite of the
common belief that Australian institutions remained insulated from the crisis.
Global economic slowdown can also lead to productivity losses in a country not
experiencing severe financial crisis because of the reforms taken long before the
crisis to improve prudential oversight of the financial institutions in Australia.
Affiliation:
- Universiti Utara Malaysia, Malaysia
- Universiti Utara Malaysia, Malaysia
- Universiti Utara Malaysia, Malaysia
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