The article provides new empirical evidence on the impact of economic globalization on the efficiency of the banking sector. The analysis is confined into two stages. In the first stage, we employ the bias corrected data envelopment analysis method to compute the efficiency of individual banks during the period 1999–2008. We then use bootstrap regressions to examine the impact of economic globalization on bank efficiency, while controlling for the potential impacts of contextual variables. The empirical findings indicate that liberalization (restrictions) of the trade and capital account exerts positive (negative) influence on the efficiency of Malaysian banks. Likewise, the impacts of better personal contacts and information flows seem to work in favor of Malaysian banks’ efficiency. The empirical findings also bring forth the importance of cultural proximity in determining the efficiency of banks operating in the Malaysian banking sector.
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