Economics banking efficiency in selected African countries in the post-reform period

Banks play an important role in the developing economies as they intermediate between the savings and the demand for investment and consumption funds that finance the development of business and trade. To efficiently and effectively perform this function and help optimize the allocation of scarce in...

Full description

Saved in:

Bibliographic Details
Main Author:	Mzee, Said Seif
Format:	Thesis
Language:	English
Published:	2013
Subjects:	Banks and banking - Africa Money Economics
Online Access:	http://psasir.upm.edu.my/id/eprint/51789/1/GSM%202013%2011RR.pdf
Tags:	Add Tag No Tags, Be the first to tag this record!

id	my-upm-ir.51789
record_format	uketd_dc
spelling	my-upm-ir.517892017-04-14T08:40:13Z Economics banking efficiency in selected African countries in the post-reform period 2013-10 Mzee, Said Seif Banks play an important role in the developing economies as they intermediate between the savings and the demand for investment and consumption funds that finance the development of business and trade. To efficiently and effectively perform this function and help optimize the allocation of scarce investment funds, evaluation of banking sector efficiency is necessary. Not much has been documented on the efficiency of banks in Africa due to a combination of several reasons such as in availability of reliable data,corporate non-transparency, and political and economic uncertainty. Therefore, to date there is no comprehensive evidence documented on banking efficiency in Africa. However in recent years, most of the African countries had some form of economic and financial reforms initiated that has attracted foreign investment in their economies and had some observed improvements in their banking system to support this new development. This study fills this gap by analyzing cost and profit efficiency and tests the management behavior of 128 commercial banks in six African countries during 1998 to 2011 using DEA technique. The determinants of the banking efficiency were also investigated using the Generalized Least Square (GLS), management behaviour were examined using Generalized Method of Moment (GMM), and the causal relationship between bank efficiency and economic growth using Granger causality approach. The findings are inconclusive for commercial banks in Africa. Mixed results were observed for banks in Algeria and South Africa, and Tanzania are found to be more profit efficient,whereas banks in Egypt, Kenya, and Nigeria found to be more cost efficient. The implication of these findings is that commercial banks in Algeria, South Africa, and Tanzania are more efficient in generating profit than controlling cost, while banks in Egypt, Kenya, and Nigeria are more efficient in controlling cost than generating profit. The findings on determinants of bank efficiency using bank specific, macroeconomic specific and industry specific determinants vary between countries but do significantly contributes towards bank efficiency. There was evidence of causality relationship between bank efficiency and economic growth which implies no long run relationship between these variables where in both case the null hypothesis of no cointegration cannot be rejected. Nonetheless, in almost all cases there is a Granger causality relationship between bank cost efficiency and economic growth and between bank cost efficiency and profit efficiency, suggesting that more cost efficient bank are also the more profit efficient bank. For the bank management behavior perspective, the findings suggests that the ‘bad luck’ hypothesis applies to commercial banks in Algeria and Nigeria but not for banks from Egypt, Kenya, South Africa and Tanzania.When banks were classified on group of countries basis, unlike the commercial banks in Kenya and Tanzania, the bad luck hypothesis supports the behavior of commercial banks in the SENA region. The bad management hypothesis explains the behavior of commercial banks in the SENA region but not for banks in the Kenya and Tanzanian region. Banks and banking - Africa Money Economics 2013-10 Thesis http://psasir.upm.edu.my/id/eprint/51789/ http://psasir.upm.edu.my/id/eprint/51789/1/GSM%202013%2011RR.pdf application/pdf en public phd doctoral Universiti Putra Malaysia Banks and banking - Africa Money Economics
institution	Universiti Putra Malaysia
collection	PSAS Institutional Repository
language	English
topic	Banks and banking - Africa Money Economics
spellingShingle	Banks and banking - Africa Money Economics Mzee, Said Seif Economics banking efficiency in selected African countries in the post-reform period
description	Banks play an important role in the developing economies as they intermediate between the savings and the demand for investment and consumption funds that finance the development of business and trade. To efficiently and effectively perform this function and help optimize the allocation of scarce investment funds, evaluation of banking sector efficiency is necessary. Not much has been documented on the efficiency of banks in Africa due to a combination of several reasons such as in availability of reliable data,corporate non-transparency, and political and economic uncertainty. Therefore, to date there is no comprehensive evidence documented on banking efficiency in Africa. However in recent years, most of the African countries had some form of economic and financial reforms initiated that has attracted foreign investment in their economies and had some observed improvements in their banking system to support this new development. This study fills this gap by analyzing cost and profit efficiency and tests the management behavior of 128 commercial banks in six African countries during 1998 to 2011 using DEA technique. The determinants of the banking efficiency were also investigated using the Generalized Least Square (GLS), management behaviour were examined using Generalized Method of Moment (GMM), and the causal relationship between bank efficiency and economic growth using Granger causality approach. The findings are inconclusive for commercial banks in Africa. Mixed results were observed for banks in Algeria and South Africa, and Tanzania are found to be more profit efficient,whereas banks in Egypt, Kenya, and Nigeria found to be more cost efficient. The implication of these findings is that commercial banks in Algeria, South Africa, and Tanzania are more efficient in generating profit than controlling cost, while banks in Egypt, Kenya, and Nigeria are more efficient in controlling cost than generating profit. The findings on determinants of bank efficiency using bank specific, macroeconomic specific and industry specific determinants vary between countries but do significantly contributes towards bank efficiency. There was evidence of causality relationship between bank efficiency and economic growth which implies no long run relationship between these variables where in both case the null hypothesis of no cointegration cannot be rejected. Nonetheless, in almost all cases there is a Granger causality relationship between bank cost efficiency and economic growth and between bank cost efficiency and profit efficiency, suggesting that more cost efficient bank are also the more profit efficient bank. For the bank management behavior perspective, the findings suggests that the ‘bad luck’ hypothesis applies to commercial banks in Algeria and Nigeria but not for banks from Egypt, Kenya, South Africa and Tanzania.When banks were classified on group of countries basis, unlike the commercial banks in Kenya and Tanzania, the bad luck hypothesis supports the behavior of commercial banks in the SENA region. The bad management hypothesis explains the behavior of commercial banks in the SENA region but not for banks in the Kenya and Tanzanian region.
format	Thesis
qualification_name	Doctor of Philosophy (PhD.)
qualification_level	Doctorate
author	Mzee, Said Seif
author_facet	Mzee, Said Seif
author_sort	Mzee, Said Seif
title	Economics banking efficiency in selected African countries in the post-reform period
title_short	Economics banking efficiency in selected African countries in the post-reform period
title_full	Economics banking efficiency in selected African countries in the post-reform period
title_fullStr	Economics banking efficiency in selected African countries in the post-reform period
title_full_unstemmed	Economics banking efficiency in selected African countries in the post-reform period
title_sort	economics banking efficiency in selected african countries in the post-reform period
granting_institution	Universiti Putra Malaysia
publishDate	2013
url	http://psasir.upm.edu.my/id/eprint/51789/1/GSM%202013%2011RR.pdf
_version_	1747812075758944256

Economics banking efficiency in selected African countries in the post-reform period

Similar Items