This study aims to examine the effects of financial development and banking regulation on technology gaps and cost efficiency in banks, controlling for bank- and country-specific factors.
A stochastic frontier analysis is used to empirically investigate the cost efficiency of 277 banks in 11 Asia-Pacific countries from 2011 to 2019. To compare their banking sectors, 11 countries are categorized as high- or low-income.
The results show that the level of financial development is key to the technology type adopted by banks in low-income countries, but the regulatory environment is more important to technology gaps and cost efficiency in high-income countries.
A limitation of this study relates to data availability: some firms were excluded through the application of limiting criteria. The research has implications for bank regulators in high-income countries and demonstrates the need for further investigation of the financial development of banks in low-income countries.
This study applies the most recent meta-frontier technique to a sample of banks in the Asia-Pacific region to identify determinants of bank cost efficiency and technology gaps.
