Bank-Specific Attributes and Operational Efficiency: Evidence from Efficient-Structure Hypothesis

Abstract

Corporate stakeholders are concerned about the operational efficiency of banks for obvious reasons. Banks play important intermediation role between the deficit and surplus sectors of the economy. Yet, there are limited empirical studies in Nigeria that examine the effects of bank attributes on their operational efficiency. This paper is an attempt to bridge this empirical gap in finance literature in Nigeria by examining the effects of bank-specific characteristics on operational efficiency. Data was extracted from the website of the Nigerian Stock Exchange. The dependent variable is operational efficiency and the independent variables are bank-specific attributes. The regression models indicate that asset turnover is superior to operating expenses to sales ratio. The results further indicate that only profitability, leverage, intellectual capital and capital expenditure ratio show significant effects. In view of these results, we suggest that bank managers should pay greater attention to profit, total assets, debt structure, intellectual capital (human, structural, relational and capital employed), cash from operations and capital expenditures. This is one of the few empirical studies that examine the impact of bank-specific traits on bank operational efficiency in Nigeria. The paper considers that the influences of bank-specific features on their operational efficiency are worth studying.