IDEAS home Printed from https://ideas.repec.org/a/taf/oaefxx/v7y2019i1p1664192.html
   My bibliography  Save this article

Evaluation of factors influencing bank operating efficiency in Tanzanian banking sector

Author

Listed:
  • Josephat Lotto

Abstract

This paper examines factors affecting operating efficiency of 36 commercial banks in Tanzania for the period between 2000 and 2017. The paper employs robust random-effect regression model to estimate the relationship between bank operating efficiency and its determinants. The results show that bank liquidity and capital adequacy have a positive relationship with bank operating efficiency. This suggests that capital adequacy and liquidity, not only strengthen financial stability by providing a larger capital cushion and bank required liquidity level, but also improve bank operating efficiency by lowering moral hazard between shareholders and debt-holders. Furthermore, the study shows that bank profitability and operating efficiency are directly related—implying that banks should put emphasis on improving their earning generating power to increase their operational efficiency. This paper suggests banks to increase their profitability by investing more on financial innovations and branch networks, and expand their market shares to boost their operational efficiency. Further, the paper argues that banks should optimally use their asset capacity to enhance their earnings profiles. At the same time, banks should avoid reckless lending that would increase the level of unsecured credits in banks’ portfolio. Finally, the results encourage banks in Tanzania to monitor and evaluate these factors for improvement to enable the sustainability of banks and industry for economic growth.

Suggested Citation

  • Josephat Lotto, 2019. "Evaluation of factors influencing bank operating efficiency in Tanzanian banking sector," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1664192-166, January.
  • Handle: RePEc:taf:oaefxx:v:7:y:2019:i:1:p:1664192
    DOI: 10.1080/23322039.2019.1664192
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/23322039.2019.1664192
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/23322039.2019.1664192?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.

    Citations

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


    Cited by:

    1. Goodhope Hance Mkaro & Lin Sea Lau & Chee Keong Choong, 2023. "The determinants of banking sector performance in Tanzania: A pre-post Treasury Single Account analysis," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2282812-228, October.
    2. Clement Olalekan Olaniyi & Titus Ayobami Ojeyinka & Xuan Vinh Vo & Mamdouh Abdulaziz Saleh Al‐Faryan, 2023. "Do business strategies vary across firms in the banking industry? New perspectives from the bank size–profitability nexus," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 525-544, January.
    3. Ghazi Zouari & Imen Abdelmalek, 2020. "Financial Innovation, Risk Management, And Bank Performance," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 9(1), pages 77-100.
    4. Rim Zouari‐Hadiji, 2023. "Financial innovation characteristics and banking performance: The mediating effect of risk management," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1214-1227, April.

    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:7:y:2019:i:1:p:1664192. 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.