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Determinants of bank technical efficiency: Evidence from rural and community banks in Ghana

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  • Michael Adusei

Abstract

What are the determinants of the technical efficiency of rural and community banks in Ghana? This paper addresses this question with data from 101 rural and community banks in Ghana. Data envelopment analysis based on the variable return to scale assumption and binary logistic regression technique has been used for analysis. The results show that only 20 rural and community banks are technically efficient. The binary logistic regression analysis provides evidence that size, profitability, and bank funding quality are significant determinants of technical efficiency in the rural banking industry in Ghana. Whereas an increase in the size and funding quality of a rural bank results in a decrease in its technical efficiency, an increase in the profitability of a rural bank improves its technical efficiency. It can be inferred from these results that the resource utilization of many rural and community banks in Ghana is weak and that the resource utilization performance of a rural bank can be assessed by considering its size, profitability, and funding quality.

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  • Michael Adusei, 2016. "Determinants of bank technical efficiency: Evidence from rural and community banks in Ghana," Cogent Business & Management, Taylor & Francis Journals, vol. 3(1), pages 1199519-119, December.
    • Handle: RePEc:taf:oabmxx:v:3:y:2016:i:1:p:1199519
    DOI: 10.1080/23311975.2016.1199519
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    Cited by:

    1. Eric Fosu Oteng-Abayie & Anthony Affram & Henry Kofi Mensah, 2018. "Corporate Governance and Efficiency of Rural and Community Banks (RCBs) in Ghana," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 3(2), pages 93-118, December.
    2. Said-Nour Samake, 2022. "Prudential Regulation and Bank Efficiency : Evidence from WAEMU Zone," Working Papers hal-03540209, HAL.
    3. Eric Fosu Oteng-Abayie, 2017. "Technical efficiency and total factor productivity of rural banks in Ghana," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1366088-136, January.
    4. Tadesse Zenebe Lema, 2017. "Determinants of bank technical efficiency: Evidence from commercial banks in Ethiopia," Cogent Business & Management, Taylor & Francis Journals, vol. 4(1), pages 1268356-126, January.
    5. Carlos S. Torres-Inga & Cristina Velasco-Heras & A. Javier Aguirre-de Juana & Guillermo E. Guevara-Viera & Raúl V. Guevara-Viera, 2022. "Technical Efficiency’s Nonparametric Analysis of Ecuadorian Saving and Credit Cooperatives before and during the Pandemic," Economies, MDPI, vol. 10(4), pages 1-15, April.

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