TOTAL FACTOR PRODUCTIVITY OF COMMERCIAL BANKS IN THAILAND

This study employed growth accounting equation to examine the total factor productivity of 14 commercial banks in Thailand during 2000 - 2009. The findings revealed that commercial banks in Thailand on average had low and very volatile total factor productivity with the average total factor productivity growth rate ranging from -13.35 - 10.06 percent per annum. In terms of individual bank, the findings revealed that most of commercial banks had the negative average total factor productivity growth rate during the study period, implying their lower productivity. In addition, the findings suggested that there were four factors which significantly determined the total factor productivity growth of commercial banks. They were credit risk as measured by the percentage of loan to total asset, management quality as measured by the percentage of non-interest expense to total asset, diversification as measured by the percentage of non-interest income to total asset and capital adequacy as measured by the percentage of owners' equity to total asset. Furthermore, small commercial banks were found to have the highest total factor productivity growth whereas large banks were found to have the lowest one.