What Drives the Performance of Selected MENA Banks? A Meta-Frontier Analysis

By Sami Ben Naceur, Barbara Casu, Hichem Ben-Khedhiri

February 1, 2011

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Sami Ben Naceur, Barbara Casu, and Hichem Ben-Khedhiri. What Drives the Performance of Selected MENA Banks? A Meta-Frontier Analysis, (USA: International Monetary Fund, 2011) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This study examines the effect of financial-sector reform on bank performance in selected Middle Eastern and North African (MENA) countries in the period 1994 -2008. We evaluate bank efficiency in Egypt, Jordan, Morocco, Lebanon and Tunisia by means of Data Envelopment Analysis (DEA) and we employ a meta-frontier approach to calculate efficiency scores in a cross-country setting. We then employ a second-stage regression to investigate the impact of institutional, financial, and bank specific variables on bank efficiency. Overall, the analysis shows that, despite similarities in the process of financial reforms undertaken in the five MENA countries, the observed efficiency levels of banks vary substantially across markets, with Morocco consistently outperforming the rest of the region.Differences in technology seem to be crucial in explaining efficiency differences. To foster banking sector performance, policies should be aimed at giving banks incentives to improve their risk management and portfolio management techniques. Improvements in the legal system and in the regulatory and supervisory bodies would also help to reduce inefficiency.

Subject: Banking, Commercial banks, Financial sector, Financial sector development, Stock markets

Keywords: Bank efficiency, DEA efficiency result, Efficiency score, Return on assets, Technology ratio, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/034
Stock No:

WPIEA2011034
ISBN:

9781455217922
ISSN:

1018-5941

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