TECHNOLOGY MATTERS: EVIDENCE FROM PAKISTANI BANKING SECTOR USING FLEXIBLE TRANSCENDENTAL LOGARITHMIC PRODUCTION FUNCTION

Technology has revolutionized the global banking industry. Most studies on the role of technology on Pakistan’s banking sector end up without quantifying the change in production due to the adoption of ICT. This study, therefore, is an attempt to investigate the production change due to the adoption of ICT by employing Cobb-Douglas and Transcendental Logarithmic Production Function (Translog production function) using Ordinary Least Squares (OLS) and Seemingly Unrelated Regression Estimation (SURE) techniques. Secondary data of 30 banks for the period of 2006-2013 has been used for analysis. The study finds that most of the ICT surrogates have positive impact on the production of banking sector in Pakistan. It is recommended for the banks to increase investment in such ICT surrogates that are positively impacting thebanking sector production in Pakistan.