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

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3 Citations (Scopus)

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 languageEnglish
Pages (from-to)1292-1310
Number of pages19
JournalManagerial Finance
Volume44
Issue number11
DOIs
Publication statusPublished - 6 Nov 2018
Externally publishedYes

Keywords

  • Banks
  • Credit union
  • DEA
  • Efficiency
  • Macroeconomics

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