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Abstract
ABSTRACTThis study examines the efficiency and sustainability of domestic and foreign banks in Tanzania from 2014 to 2023. Employing Data Envelopment Analysis (DEA) with bootstrapped DEA for efficiency assessment and fractional logit regression to identify key determinants, the study provides a robust empirical evaluation of banking performance. The findings reveal that foreign banks demonstrate higher efficiency levels than domestic banks, with mean CCR and BCC scores of 92.2% and 93.6%, respectively, compared to 80.7% and 85.4% for domestic banks. Bootstrapped DEA results indicate that traditional DEA marginally overestimates efficiency levels, yet foreign banks maintain superior performance even after bias correction. The Mann–Whitney U test confirms statistically significant differences in efficiency scores (p < 0.05), supporting the hypothesis that foreign banks operate more efficiently. Fractional logit regression results further reveal that bank size, capital adequacy, and digital adoption positively influence efficiency, whereas asset quality and operational costs exert a negative impact. This study contributes to the resource‐based theory, X‐efficiency theory, and the theory of technological diffusion by demonstrating how digital transformation enhances efficiency and sustainability. From a practical perspective, the findings offer valuable insights for policymakers, regulators, and banking institutions on optimizing digital banking strategies to improve efficiency and long‐term sustainability. By integrating empirical rigor with theoretical depth, this study provides a comprehensive framework for assessing banking performance in developing economies amid digital transformation.
Published Version
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