This thesis aims to study the efficiency of Thai commercial banks. This study is divided into two parts. First part is to evaluate the efficiency of Thai commercial bank on their market value by using Stochastic Frontier Analysis Model. Second part is to study the determinants of the efficiency by using the fixed effect model. Data of 13 Thai commercial banks in the period between 1997 and 2003 are employed. Efficiency level has positive correlation with the size of banks. KasikornBank (KBANK) was the most efficient bank. We find that the efficiency had statistically positive relationship with loan to asset ratio, deposit to asset ratio and allowance for doubtful accounts to loan ratio. While number of employees to asset ratio, land to asset ratio, non-performance loan to loan ratio and size of banks, have significant negative relations with the efficiency. Investment in securities to asset ratio, capital structure, level of capital as well as control mechanism stock holders had no impacts on efficiency. In conclusion, commercial banks would be able to increase their own efficiency by extending their loan base, which they must control the quality of their loan. Commercial banks should avoid the investment that will not generate income in order to decrease the opportunity cost. Good management of NPLs will lead to the improvement of efficiency.
