Environmental factors affecting Hong Kong banking: A post-Asian financial crisis efficiency analysis

This paper examines the evolution of Hong Kong banks' technical efficiency during the period 2000-2006 through the prism of the intermediation and production approaches. Using a modified slacks-based model and purging efficiency scores of random errors, we analyse trends in bank efficiency and identify 'environmental' factors that affect the scores. Analysis reveals that Hong Kong banks suffered a severe downturn in technical efficiency during 2001 but recovered by 2006. Finally, private housing rent and the net export of goods and services are found to be negatively correlated with bank efficiency, while private consumption is shown to be positively correlated.