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Technical efficiency: the pathway to credit union cost efficiency in Ghana

Benjamin Amoah, Kwaku Ohene-Asare, Godfred Alufar Bokpin and Anthony Q.Q. Aboagye

Managerial Finance, 2018, vol. 44, issue 11, 1292-1310

Abstract: Purpose - The purpose of this paper is to investigate the factors that tend to influence credit union efficiency, specifically examining cost efficiency (CE) and technical efficiency. Design/methodology/approach - Using a two-stage method, the authors first estimate CE using Tones’ SBM data envelopment analysis method and technical efficiency in a variable returns to scale setting during the period 2008–2014. The authors estimate a mixed-effects and two-limit Tobit regression to examine the effect of credit union specific characteristics, banking industry and macroeconomic conditions, on efficiency. Findings - Credit unions’ CE averaged 38.9 percent compared to 54.4 percent for technical efficiency. The authors find that technical efficiency does not translate into CE and vice versa. Practical implications - The authors suggest that when targeting CE, credit union managers would have to make technical efficiency a priority. A monopolized and inefficient banking sector does not challenge efficiency improvement in the credit unions industry. Originality/value - This study employs data from a frontier market.

Keywords: Efficiency; Banks; DEA; Macroeconomics; Credit union (search for similar items in EconPapers)
Date: 2018
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