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Profit efficiency of banks in Colombia with undesirable output: A directional distance function approach

Camilo Ramirez (), Jhon Mora () and Andrés Cendales

No 2017-90, Economics Discussion Papers from Kiel Institute for the World Economy (IfW)

Abstract: This study investigates the sources of bank efficiency in Colombia over the period 2000-2011. To perform this research, the authors propose a score of bank efficiency using the directional distance function, which was estimated using data envelopment analysis. Additionally, they use an ordered probit panel regression to explore the effects of some market-related and bank-specific factors on efficiency. The authors' results show that the non-inclusion of non-performing loans (NPLs) leads to higher bank inefficiency indicators, which are significantly different from those obtained when NPLs are included. Further, the authors find that economic growth, capital risk, foreign and national banks, and account liquidity risk explain, in part, the efficiency of Colombian banks.

Keywords: data envelopment analysis; Colombia; directional distance function; nonperforming loans; ordered probit panel models (search for similar items in EconPapers)
JEL-codes: D22 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-eff
Date: 2017
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http://www.economics-ejournal.org/economics/discussionpapers/2017-90
https://www.econstor.eu/bitstream/10419/170722/1/1002792835.pdf (application/pdf)

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Journal Article: Profit efficiency of banks in Colombia with undesirable output: A directional distance function approach (2018) Downloads
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