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Cost Efficiency of the Egyptian Banking Sector: A Panel Data Analysis

Author

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  • Hassan Ismail Hassan

    (Department of Banking and Finance, College of Business Administrative, Al Ain University of Science and Technology, UAE,)

  • Ammar Jreisat

    (Department of Banking and Finance, College of Business Administrative, Al Ain University of Science and Technology, UAE.)

Abstract

Based on a two stage method this paper investigates the determinants of the cost efficiency (CE) of Egyptian banking sector. Employing data envelopment analysis (DEA). We compare the CE of large, medium and small banks and the CE of foreign and domestic banks using a balanced panel which cover 14 banks operating in Egypt from 1997 to 2013. In the first stage, CE scores are computed using an input-oriented DEA. At the second stage, CE scores are regressed on a set of potential explanatory variables in a logit model. While the CE scores show large improvements in the early and third phases of financial deregulation. Over the entire sample period, CE has declined at the rate of 0.963% per annum. Our finding indicates that age, loan to net interest margin, return on equity and good management practices positively affects banks CE and number of bank branches negatively affects bank CE.

Suggested Citation

  • Hassan Ismail Hassan & Ammar Jreisat, 2016. "Cost Efficiency of the Egyptian Banking Sector: A Panel Data Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 861-871.
    • Handle: RePEc:eco:journ1:2016-03-6
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    References listed on IDEAS

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    8. Chen, Xiaogang & Skully, Michael & Brown, Kym, 2005. "Banking efficiency in China: Application of DEA to pre- and post-deregulation eras: 1993-2000," China Economic Review, Elsevier, vol. 16(3), pages 229-245.
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    Cited by:

    1. Ying Li & Yung‐ho Chiu & Ying Yu Chen & Lihua Wang & Yi‐Nuo Lin & Su‐Wan Wang, 2022. "The impact of market share on efficiency of commercial banks: Resampling slacks‐based measure data envelopment analyses model," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1621-1634, July.
    2. Abayomi Oredegbe, 2021. "Cost Efficiency Determinants: Evidence from the Canadian Banking Industry," International Journal of Business and Management, Canadian Center of Science and Education, vol. 15(1), pages 1-86, July.

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    More about this item

    Keywords

    Cost Efficiency; Two-stage Data Envelopment Analysis; Egyptian Banks;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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