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What Drives the Performance of Selected MENA Banks? A Meta-Frontier Analysis

Author

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  • Sami Ben Naceur
  • Barbara Casu
  • Hichem Ben-Khedhiri

Abstract

This study examines the effect of financial-sector reform on bank performance in selected Middle Eastern and North African (MENA) countries in the period 1994 -2008. We evaluate bank efficiency in Egypt, Jordan, Morocco, Lebanon and Tunisia by means of Data Envelopment Analysis (DEA) and we employ a meta-frontier approach to calculate efficiency scores in a cross-country setting. We then employ a second-stage regression to investigate the impact of institutional, financial, and bank specific variables on bank efficiency. Overall, the analysis shows that, despite similarities in the process of financial reforms undertaken in the five MENA countries, the observed efficiency levels of banks vary substantially across markets, with Morocco consistently outperforming the rest of the region.Differences in technology seem to be crucial in explaining efficiency differences. To foster banking sector performance, policies should be aimed at giving banks incentives to improve their risk management and portfolio management techniques. Improvements in the legal system and in the regulatory and supervisory bodies would also help to reduce inefficiency.

Suggested Citation

  • Sami Ben Naceur & Barbara Casu & Hichem Ben-Khedhiri, 2011. "What Drives the Performance of Selected MENA Banks? A Meta-Frontier Analysis," IMF Working Papers 11/34, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/34
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    1. Sipilainen, Timo & Kuosmanen, Timo & Kumbhakar, Subal C., 2008. "Measuring productivity differentials – An application to milk production in Nordic countries," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44277, European Association of Agricultural Economists.
    2. Naceur, Samy Ben & Ghazouani, Samir, 2007. "Stock markets, banks, and economic growth: Empirical evidence from the MENA region," Research in International Business and Finance, Elsevier, vol. 21(2), pages 297-315, June.
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    Cited by:

    1. Tammuz Alraheb & Amine Tarazi, 2016. "Local Versus International Crises, Foreign Subsidiaries and Bank Stability: Evidence from the MENA Region," Working Papers 1045, Economic Research Forum, revised 09 Jan 2016.
    2. repec:wsi:medjxx:v:03:y:2011:i:02:n:s1793812011000399 is not listed on IDEAS
    3. Michael, Bryane & Apostoloski, Nenad, 2012. "The Middle Eastern Wealth Management Industry: Boon or Bust?," MPRA Paper 52069, University Library of Munich, Germany.
    4. Lassoued, Naima & Sassi, Houda & Ben Rejeb Attia, Mouna, 2016. "The impact of state and foreign ownership on banking risk: Evidence from the MENA countries," Research in International Business and Finance, Elsevier, vol. 36(C), pages 167-178.
    5. Makni, Rania & Benouda, Olfa & Delhoumi, Ezzedine, 2015. "Large scale analysis of Islamic equity funds using a meta-frontier approach with data envelopment analysis," Research in International Business and Finance, Elsevier, vol. 34(C), pages 324-337.
    6. Hakan Güneş & Dilem Yıldırım, 2016. "Estimating Cost Efficiency of Turkish Commercial Banks under Unobserved Heterogeneity with Stochastic Frontier Models," ERC Working Papers 1603, ERC - Economic Research Center, Middle East Technical University, revised Mar 2016.
    7. Guizani, Brahim, 2014. "Capital Requirements, Banking Supervision and Lending Behavior: Evidence from Tunisia," MPRA Paper 54234, University Library of Munich, Germany.
    8. Thanh Pham Thien Nguyen & Son Hong Nghiem & Eduardo Roca & Parmendra Sharma, 2016. "Efficiency, innovation and competition: evidence from Vietnam, China and India," Empirical Economics, Springer, vol. 51(3), pages 1235-1259, November.

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