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Comparison on Efficiency of Foreign and Domestic Banks Evidence from Algeria

Author

Listed:
  • Ishaq Hacini

    (Department of Economics, University of Mascara, Algeria)

  • Khadra Dahou

    (Department of Management, University of Mascara, Algeria)

Abstract

The study investigates the differences in technical, pure technical, and scale efficiencies of domestic and foreign banks in Algeria over the period of 2000–2012. The study uses annual data of 10 foreign banks and 05 domestic banks operated in Algeria. The input-oriented Data Envelopment Analysis model is used to measure the banks’ efficiency score. In addition, a set of parametric and non-parametric tests are used for investigating the differences in efficiency between foreign and domestic banks. The findings reveal that the banks in Algeria could improve their technical efficiency by 23%. In addition, it seems that banks in Algeria suffer from the scale inefficiency. On the other hand, the foreign banks are more technically efficient than domestic banks. The superiority of foreign banks in technical efficiency is due to their superiority in the scale efficiency.

Suggested Citation

  • Ishaq Hacini & Khadra Dahou, 2018. "Comparison on Efficiency of Foreign and Domestic Banks Evidence from Algeria," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(10), pages 106-119, December.
    • Handle: RePEc:sgm:jbfeuw:v:2:y:2018:i:10:p:106-119
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    More about this item

    Keywords

    Algeria; Data Envelopment Analysis; Efficiency; Domestic banks; Foreign banks;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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