IDEAS home Printed from https://ideas.repec.org/a/taf/oaefxx/v12y2024i1p2319173.html
   My bibliography  Save this article

Technical and allocative efficiency of commercial banks in Ethiopia

Author

Listed:
  • Bisrat Getinet Chane
  • Desta Yohannes Dalalo
  • Berhanu Dereja Gebremichael

Abstract

This paper investigated the technical and allocative efficiency of commercial banks in Ethiopia. The analysis was based on unbalanced panel data of 19 banks over the period of 1990-2022. The study has applied shadow pricing approach to estimate and decompose the overall cost inefficiency into technical and allocative components. Findings reveal that publicly owned commercial bank is technically more efficient than privately owned commercial banks. Evidence also found that, on average, small and recently established privately owned banks are technically more efficient than other large private owned banks in Ethiopia. All banks are found allocative inefficiency due to over-utilization of loanable funds and physical capital relative to labor input. The overall result also shows that greater cost saving in public owned commercial bank in Ethiopia could be achieved by optimizing input use, while such cost advantage in private owned banks could be attained by improving managerial efficiency.In developing countries like Ethiopia where secondary financial markets are tiny or non-existent, promoting safe and robust commercial banking system is an important prerequisite for economic growth and development. The safety and soundness of the banking system are inextricably linked to economic efficiency of individual commercial banks. This study estimate and decompose cost efficiency of Ethiopian commercial banks into technical and allocative efficiencies (inefficiencies). The results of the study provide a valuable information to the shareholders, government and regulators in designing policies that improve the profitability and competitiveness of commercial banks.

Suggested Citation

  • Bisrat Getinet Chane & Desta Yohannes Dalalo & Berhanu Dereja Gebremichael, 2024. "Technical and allocative efficiency of commercial banks in Ethiopia," Cogent Economics & Finance, Taylor & Francis Journals, vol. 12(1), pages 2319173-231, December.
  • Handle: RePEc:taf:oaefxx:v:12:y:2024:i:1:p:2319173
    DOI: 10.1080/23322039.2024.2319173
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/23322039.2024.2319173
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/23322039.2024.2319173?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    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:taf:oaefxx:v:12:y:2024:i:1:p:2319173. 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/OAEF20 .

    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.