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.
Original language | English |
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Pages (from-to) | 1292-1310 |
Number of pages | 19 |
Journal | Managerial Finance |
Volume | 44 |
Issue number | 11 |
DOIs | |
Publication status | Published - 6 Nov 2018 |
Externally published | Yes |
Keywords
- Banks
- Credit union
- DEA
- Efficiency
- Macroeconomics