IDEAS home Printed from https://ideas.repec.org/a/eme/aeapps/aea-09-2019-0027.html
   My bibliography  Save this article

Determinants of bank efficiency: evidence from the Latin American banking industry

Author

Listed:
  • Ignacio Jiménez-Hernández
  • Gabriel Palazzo
  • Francisco Javier Sáez-Fernández

Abstract

Purpose - The purpose of this paper is to analyze a variety of factors that can explain the differences in commercial bank efficiency among 17 countries in Latin America (LatAm). Design/methodology/approach - In a first stage, data envelopment analysis (DEA) and conditional efficiency analysis techniques are used to assess the relative efficiency level of 409 banks for the 2014-2016 period. The conditional efficiency approach considers environmental variables (that are beyond the manager’s control), which could influence the shape and the level of the boundary of the attainable set. In the second stage, the resulting conditional efficiency scores are correlated with internal variables (those that are under the manager’s control), which might affect the distribution of the inefficiencies. For this purpose, an econometric approach developed by Simar and Wilson (2007) is used. Findings - First stage scores reveal the heterogeneity of average efficiency within the region. Regarding the factors that may explain the differences in performance in the LatAm banking sector, the results allow us to state that certain internal variables such as bank size, the ratio of loans to total assets and the ratio of non-performing loans show the expected relationship to efficiency, in line with much of the previous literature. Originality/value - This is the first time that conditional efficiency and Simar and Wilson (2007) approaches have been applied at the same time to analyse the LatAm banking industry.

Suggested Citation

  • Ignacio Jiménez-Hernández & Gabriel Palazzo & Francisco Javier Sáez-Fernández, 2019. "Determinants of bank efficiency: evidence from the Latin American banking industry," Applied Economic Analysis, Emerald Group Publishing Limited, vol. 27(81), pages 184-206, October.
    • Handle: RePEc:eme:aeapps:aea-09-2019-0027
    DOI: 10.1108/AEA-09-2019-0027
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/AEA-09-2019-0027/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: no
    File URL: https://www.emerald.com/insight/content/doi/10.1108/AEA-09-2019-0027/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: no
    File URL: https://libkey.io/10.1108/AEA-09-2019-0027?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carlos González-Rossano & Antonia Terán-Bustamante & Marisol Velázquez-Salazar & Antonieta Martínez-Velasco, 2023. "What Drives Profit Income in Mexico’s Main Banks? Evidence Using Machine Learning," Sustainability, MDPI, vol. 15(7), pages 1-19, March.
    2. Salah Mohammed Abdulahi & Mekonnen Kumlachew Yitayaw & Habtamu Legese Feyisa & Wondmagegn Biru Mamo, 2023. "Factor affecting technical efficiency of the banking sector: Evidence from Ethiopia," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(1), pages 2186039-218, December.
    3. Mohamed Mehdi Jelassi & Ezzeddine Delhoumi, 2021. "What explains the technical efficiency of banks in Tunisia? Evidence from a two-stage data envelopment analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-26, December.
    4. Cortés-García, J. Salvador & Pérez-Rodríguez, Jorge V., 2024. "Heterogeneity and time-varying efficiency in the Ecuadorian banking sector. An output distance stochastic frontier approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 164-175.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:aeapps:aea-09-2019-0027. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.