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Estimating And Analyzing The Technical Efficiency Of Banks In Ghana

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  • Y. Abdul Karimu Tossa

Abstract

This study examined the Technical Efficiency (TE) of commercial banks in Ghana and the determinants of TE in the banking sector. Data Envelopment Analysis (DEA), Random-Effects Tobit regression and Ordinary Least Square (OLS) were the statistical tools used on a sample of 21 banks operating between 2009 and 2013. The results showed that there were more technically inefficient banks in the country than there were technically efficient ones. Another revelation was that, on the average, TE varied directly in proportion to bank size within the two upper quartiles but large banks did not benefit from economy of scales as an edge over small banks. Finally, Gross Domestic Product (GDP) per capita, inflation, credit risk, size and operating cost negatively influenced efficiency while market concentration had a positive influence on efficiency. In our recommendations, we admonished Bank managers to minimize their operating cost and credit risk. Similarly, we recommended that government limit inflation. Finally, we upheld the continuation of the policy of higher capitalization that the Bank of Ghana had been pursuing

Suggested Citation

  • Y. Abdul Karimu Tossa, 2016. "Estimating And Analyzing The Technical Efficiency Of Banks In Ghana," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 10(4), pages 73-90.
    • Handle: RePEc:ibf:ijbfre:v:10:y:2016:i:4:p:73-90
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    Cited by:

    1. 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.

    More about this item

    Keywords

    Bank; Technical Efficiency; DEA; Determinants;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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