The impact of financial liberalization on the performance of Thai banks

Using best practice production frontiers, we constructed Malmquist growth indexes and productivity indexes for each Thai bank for 1989-1994. We constructed these indexes for two different specifications of the services banks provide: one derived from the objectives of the banks themselves, and the other derived from the objectives of the Bank of Thailand. We found that, when bank objectives were used, the average bank in Thailand experienced relatively rapid growth in production (relative to the previous year's best practice) and in total factor productivity. When Bank of Thailand objectives were used, similar levels of rapid growth relative to best practice were found, but total factor productivity declined for Thai banks and increased for foreign banks