Financial liberalization (FL), environment variables and cost efficiency of Tunisian banking system

In this paper, we tried to see if the Tunisian banks are ready to confront the different and main challenges of financial liberalization. The main objective of this paper is defined in this context. We investigate the cost efficiency of Tunisian universal banks over the period 1997–2006. We examine the influence of environmental variables on the bank cost-efficiency. We used a parametric approach stochastic “SFA†. Our results generally indicate the deterioration of different financial indicators of Tunisian banking system, and show that there is a reduction in the level of cost-efficiency after introducing the environmental variables in the model. Our results suggest as well that private banks are more efficient than ownership banks; foreign banks are more efficient than domestic banks. Finally, we found that small and Medium-sized banks are more efficient than large banks.