Examining banking productivity drivers in MENA banks after financial liberalisation in 1990s

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Abstract

The paper investigates whether deregulation and economic reforms have transformed the MENA banking sector into a more productive and efficient sector. This is the first study to cover a large sample of 11 MENA countries for an extended and recent period (1999-2012). Initially, this paper estimates the productivity and efficiency of MENA commercial banks using Malmquist DEA to estimate productivity (TFP), technological and technical efficiency, and scale efficiency change in order to investigate to what extent banking productivity in MENA economies has improved during the study period. Then, Tobit model is employed to examine the impact of bank and macroeconomic variables on the total factor productivity of MENA commercial banks. The obtained MPI results suggest that commercial banks operating in the Gulf countries have exhibited productivity progress mostly due to the technological progress rather than efficiency change. Results also suggest that expenses preference behaviour would help banks to enhance their productivity in the examined period and MENA countries. Whilst banking productivity is improved by financial reforms and technological progress, such findings overall do not indicate that foreign participation or state ownership lead to enhance productivity of banks, whilst suggesting that a number of sound policies should be implemented taking into account the characteristics of banking sector in MENA countries.

Keywords: DEA, Productivity, Efficiency, Liberalisation, MENA

JEL Classification: G21, F30, G20

Received: 20.01.2019

Accepted: 06.03.2019

Published online: 19.03.2019

How to cite this paper: Elfeituri, H. (2019). Examining banking productivity drivers in MENA banks after financial liberalisation in 1990s. Journal of Governance & Regulation, 8(1), 59-74. https://doi.org/10.22495/jgr_v8_i1_p5