MEASUREMENT OF INEFFICIENCIES IN BANGLADESH BANKING INDUSTRY USING STOCHASTIC FRONTIER PRODUCTION FUNCTION

This paper examines inefficiencies of Bangladesh banking industry using the stochastic frontier production function model and the time invariant cross-sectional data. The measure of ith bank technical efficiency indicates that the efficiency of Bangladesh commercial banks lies between 12.7 and 94.7 percent; the industry average is 69.5 percent. The model suggests that about 30 percent of the commercial banks in Bangladesh are below the industry average.