Table 6. Determinants of bank efficiency
Note. Each cell contains the estimated parameters, with std error between brackets, where * denotes p-value of 10%, ** denotes 5% and *** denotes 1%
Table 6 indicates that “bank ownership” may explain 21.1 % of efficiency score at p-value of 1% and when adding “bank age” , R^2 becomes 23.4% This means that:
Regarding bank size: Robustness check does not support the results obtained by conducting Wilcoxon signed rank test. Literature indicates that this point still needs to be more elaborated. Moh’d AI-Jarrah (2007) shows that bank’s size affects its cost efficiency scores. Besides, cavalla and Kasman (2005) indicates that on average, very small and very large banks are significantly more inefficient than large banks. In addition, Anis and Sami (2012) sows that small and medium-sized banks are more efficient than large ones.
Regarding bank age: Robustness check supports its effect, as it adds to the explanatory power. Really, R^2 has been increased only by 2.3% (from 21.1% to 23.4%), but the effete seems to be significant and robust.
Regarding bank ownership: Robustness check supports the results obtained by conducting Wilcoxon signed rank test. In addition, literature assures assures this effect, where Fries and Taci (2004) and Anis and Sami (2012) indicate that foreign banks are more efficient than domestic ones. Besides, Theayparan and Pratheepan (2014) concludes that private banks are more efficienl than state ones. Bank ownership explains 21.1% of efficiency scores and this conld be moer elaborated by analyzing private banks characteristics that may enhance efficiency. Further research may investigate their competitive advantages in areas of risk management, systemic risk and financial stability.