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Efficiency of Commercial Banks in Lebanon

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  • Salpie DJOUNDOURIAN
  • Elias RAAD

Abstract

The study evaluates the key performance indicators of the banking sector in post-war Lebanon, in an attempt to assess the efficiency of the sector in producing the conventional outputs. Using data from 1993 to 2002, we observe that the sector grew significantly in size as measured by assets, but the growth in assets was not accompanied by a similar growth in profits. Equity capital grew significantly over the period and the sector became safer. In fact, the prevalence of Lebanese treasury bills in the banks' asset portfolio indicates that commercial banks during this period did not play their traditional role of financing the private sector initiatives; instead, the bulk of their funds financed the public sector. The stochastic production and cost function estimates show that bank level inefficiency effects decreases with time and increases with number of branches, employees per branch, and ratio of staff to operating expenses.
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Suggested Citation

  • Salpie DJOUNDOURIAN & Elias RAAD, 2001. "Efficiency of Commercial Banks in Lebanon," Middle East and North Africa 330400021, EcoMod.
    • Handle: RePEc:ekd:003304:330400021
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    References listed on IDEAS

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    1. Rogers, Kevin E., 1998. "Nontraditional activities and the efficiency of US commercial banks," Journal of Banking & Finance, Elsevier, vol. 22(4), pages 467-482, May.
    2. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
    3. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
    4. Kumbhakar,Subal C. & Lovell,C. A. Knox, 2003. "Stochastic Frontier Analysis," Cambridge Books, Cambridge University Press, number 9780521666633, September.
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    Cited by:

    1. Awdeh Ali & El Moussawi Chawki, 2009. "Bank Efficiency and Foreign Ownership in the Lebanese Banking Sector," Review of Middle East Economics and Finance, De Gruyter, vol. 5(2), pages 66-87, September.

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