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The Impact of the Global Financial Crisis on Efficiency and Productivity of the Banking System in South Africa


  • Andrew Maredza and Sylvanus Ikhide


South Africa‘s financial sector is believed to have weathered the contagion and catastrophic effects of the 2008 world wide financial crisis partly on account of a sound regulatory framework and solid macroeconomic policies. In this paper, we seek to measure efficiency and productivity changes during the period of the crisis through an analysis of bank performance over the period 2000 — 2010 using a two stage methodology framework. The recently developed Hicks-Moorsteen total factor productivity (TFP) index approach developed by O‘Donnell (2010a) as opposed to the popular Malmquist TFP was utilised. Our first stage results showed that during the crisis period there was a noticeable but mild deviation of total factor productivity and efficiency measures. Second stage analysis using the censored Tobit model showed that the financial crisis was the main determinant of bank efficiency, indicating that total factor productivity efficiency was 16.96% lower during the crisis period compared to the pre-crisis period.

Suggested Citation

  • Andrew Maredza and Sylvanus Ikhide, 2013. "The Impact of the Global Financial Crisis on Efficiency and Productivity of the Banking System in South Africa," Working Papers 328, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:328

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    References listed on IDEAS

    1. Rebecca S. Demsetz & Philip E. Strahan, 1995. "Diversification, size, and risk at bank holding companies," Research Paper 9506, Federal Reserve Bank of New York.
    2. Christopher J. O'Donnell, 2012. "Nonparametric Estimates of the Components of Productivity and Profitability Change in U.S. Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(4), pages 873-890.
    3. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
    4. Bjurek, Hans, 1996. " The Malmquist Total Factor Productivity Index," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(2), pages 303-313, June.
    5. Simbanegavi, Witness & Greenberg, Josh & Gwatidzo, Tendai, 2012. "Testing for competition in the South African banking sector," MPRA Paper 43627, University Library of Munich, Germany.
    6. Christopher J. O'Donnell, 2010. "Measuring and decomposing agricultural productivity and profitability change ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 527-560, October.
    7. C. Charles Okeahalam, 2006. "Production Efficiency in the South African Banking Sector: A Stochastic Analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(1), pages 103-123.
    8. Kupukile Mlambo & Mthuli Ncube, 2011. "Competition and Efficiency in the Banking Sector in South Africa," African Development Review, African Development Bank, vol. 23(1), pages 4-15.
    9. Walter Briec & Kristiaan Kerstens, 2011. "The Hicks–Moorsteen Productivity Index Satisfies The Determinateness Axiom," Manchester School, University of Manchester, vol. 79(4), pages 765-775, July.
    10. Fadzlan Sufian, 2010. "The impact of the Asian financial crisis on bank efficiency: The 1997 experience of Malaysia and Thailand," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(7), pages 866-889.
    11. Zuzana Iršová & Tomáš Havránek, 2010. "Measuring Bank Efficiency: A Meta-Regression Analysis," Prague Economic Papers, University of Economics, Prague, vol. 2010(4), pages 307-328.
    12. Sylvanus i. Ikhide, 2008. "Measuring The Operational Efficiency Of Commercial Banks In Namibia," South African Journal of Economics, Economic Society of South Africa, vol. 76(4), pages 586-595, December.
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    Cited by:

    1. Wanke, Peter & Maredza, Andrew & Gupta, Rangan, 2017. "Merger and acquisitions in South African banking: A network DEA model," Research in International Business and Finance, Elsevier, vol. 41(C), pages 362-376.
    2. Gulati, Rachita & Kumar, Sunil, 2016. "Assessing the impact of the global financial crisis on the profit efficiency of Indian banks," Economic Modelling, Elsevier, vol. 58(C), pages 167-181.

    More about this item


    Bank efficiency; data envelopment analysis; global financial crisis; Hicks-Moorsteen; Malmquist; South African banking; total factor productivity efficiency; censored Tobit model;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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