Efficiency of Commercial Banks in Sub-Saharan Africa: A Comparative Analysis of Domestic and Foreign Banks
AbstractUtilizing the stochastic frontier approach, this study conducts a comparative analysis of profit efficiency and cost inefficiency of commercial banks operating in 29 sub-Saharan African (SSA) countries by bank ownership (domestic bank, SSA foreign bank or non-SSA foreign bank), as well as by the bank size during 2000-07. Tobit regressions are employed to assess the impact of environmental factors on the efficiency of commercial banks. The key findings of this empirical analysis suggest that foreign banks tend to outperform domestic banks in terms of profit efficiency. In terms of efficiency by bank size, the smaller the bank, the more profit efficient the bank will be; medium or relatively large banks tend to be the most cost efficient.
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Bibliographic InfoPaper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper WP2011/58.
Date of creation: 2011
Date of revision:
banking; stochastic frontier; Tobit regression; Africa;
This paper has been announced in the following NEP Reports:
- NEP-AFR-2012-03-28 (Africa)
- NEP-ALL-2012-03-28 (All new papers)
- NEP-BAN-2012-03-28 (Banking)
- NEP-EFF-2012-03-28 (Efficiency & Productivity)
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