Abstract
AbstractThe main objective of this study is to examine the determinants of the technical efficiency of commercial banks in Ethiopia over the period from 2011 to 2014. For this purpose, the study used secondary data from the annual reports of the commercial banks in Ethiopia under study. To estimate the technical efficiency score DEA was employed on input variables (interest expense, operating expense and deposit) and output variables (interest income, non-interest income and loan). The estimated technical efficiency score indicated that, Under the constant returns to scale assumption Abay bank, Construction and Business bank and Cooperative bank of Oromia are found to be less efficient, while Nib international bank and Oromia international bank are found to be more efficient. Under the variables returns to scale assumption Construction and Business bank, Abay bank and Cooperative bank of Oromia are found to be less efficient while Oromia international bank, Awash international bank and Wegagen bank are fo...
Highlights
Banks play an important role in an economy of a nation
Conclusion and direction for future research This study is conducted to examine the determinants of technical efficiency of commercial banks in Ethiopia
Nib international bank and Oromia international bank are found to be more efficient under the constant returns to scale (CRS) assumption, while Oromia international bank, Awash international bank and Wegagen bank are found to be more efficient under the VRS assumption
Summary
According to Sergeant (2001), banks contribute to investments, employment creation and the process of economic growth and development They are the corner stone of an economy of a given nation (Omankhanlen, 2012). Banks provide the bulk of money supply and are the primary means of facilitating the flow of credit (Omankhanlen, 2012) Given this fact, over the period 2011–2015, the government of Ethiopia prepared a growth and transformation plan (GTP) directed towards achieving Ethiopia’s long-term vision and sustained the rapid and broad-based economic growth performance. According to Keatinge (2014), the development of private banking system is considered important to Ethiopia’s economic progress and a key to the success of the country’s GTP
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