THE IMPACT OF BANKING REGULATIONS ON THE TFP GROWTH OF COMMERCIAL BANK: A CASE STUDY OF FIVE ASEAN ECONOMIES

This study aims to identify the determinants of Total Factor Productivity (TFP) Growth of commercial banks in five Asian economies. The effect of deregulation on banking TFP growth still depends on national environment, and this effect is not robust in previous studies in other emerging market economies. The empirical strategy of this study consists of two steps. Firstly, the estimate of the Malquist index measures the productivity growth of 144 banks in five Asean economies from 2005-2012. Next, the impact of determinants of productivity growth that is measured by GMM estimator. The first contribution of this study is that Government intervention and market discipline co-evolve to increases TFP growth, which implies that good supervision is better than strict supervision. Secondly, this study finds out the dynamic relation among bank's business model, its TFP growth, and activity restriction regulation. The activity restriction regulation could drive the bank's diversification strategy to be optimal in social welfare. Finally, state-owned banks are drivers of TFP growth rate because of their dominance in banking system.