Technical and allocative efficiency of commercial banks in Ethiopia
AbstractThis 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 int...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group
2024-12-01
|
| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2024.2319173 |
| _version_ | 1797258523504017408 |
|---|---|
| author | Bisrat Getinet Chane Desta Yohannes Dalalo Berhanu Dereja Gebremichael |
| author_facet | Bisrat Getinet Chane Desta Yohannes Dalalo Berhanu Dereja Gebremichael |
| author_sort | Bisrat Getinet Chane |
| collection | DOAJ |
| description | AbstractThis 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. |
| first_indexed | 2024-04-24T22:54:53Z |
| format | Article |
| id | doaj.art-6ffa7100f8f44dc3b070906669909404 |
| institution | Directory Open Access Journal |
| issn | 2332-2039 |
| language | English |
| last_indexed | 2024-04-24T22:54:53Z |
| publishDate | 2024-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj.art-6ffa7100f8f44dc3b0709066699094042024-03-18T08:21:54ZengTaylor & Francis GroupCogent Economics & Finance2332-20392024-12-0112110.1080/23322039.2024.2319173Technical and allocative efficiency of commercial banks in EthiopiaBisrat Getinet Chane0Desta Yohannes Dalalo1Berhanu Dereja Gebremichael2College of Business and Economics, Department of Economics, Wolkite University, Wolkite, EthiopiaDepartment of Accounting and Finance, Wolkite University, Wolkite, EthiopiaDepartment of Accounting and Finance, Wolkite University, Wolkite, EthiopiaAbstractThis 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.https://www.tandfonline.com/doi/10.1080/23322039.2024.2319173Technical efficiencyallocative efficiencycommercial banks in Ethiopiashadow priceFourier Flexible cost functionDr David McMillan University of Stirling |
| spellingShingle | Bisrat Getinet Chane Desta Yohannes Dalalo Berhanu Dereja Gebremichael Technical and allocative efficiency of commercial banks in Ethiopia Cogent Economics & Finance Technical efficiency allocative efficiency commercial banks in Ethiopia shadow price Fourier Flexible cost function Dr David McMillan University of Stirling |
| title | Technical and allocative efficiency of commercial banks in Ethiopia |
| title_full | Technical and allocative efficiency of commercial banks in Ethiopia |
| title_fullStr | Technical and allocative efficiency of commercial banks in Ethiopia |
| title_full_unstemmed | Technical and allocative efficiency of commercial banks in Ethiopia |
| title_short | Technical and allocative efficiency of commercial banks in Ethiopia |
| title_sort | technical and allocative efficiency of commercial banks in ethiopia |
| topic | Technical efficiency allocative efficiency commercial banks in Ethiopia shadow price Fourier Flexible cost function Dr David McMillan University of Stirling |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2024.2319173 |
| work_keys_str_mv | AT bisratgetinetchane technicalandallocativeefficiencyofcommercialbanksinethiopia AT destayohannesdalalo technicalandallocativeefficiencyofcommercialbanksinethiopia AT berhanuderejagebremichael technicalandallocativeefficiencyofcommercialbanksinethiopia |