The Structure and Efficiency of Ethiopian Commercial bank

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Using the stochastic frontier analysis and employing the cost, standard profit, alternative profit and labor efficiency concepts, this study has analyzed the efficiency situations and identified the exogenous factors affecting the inefficiencies of the Ethiopian commercial banks from 1994/95 to 2004/05. FUl1hermore, the study has investigated whether or not management inefficiency existed in the banks and the quality difference in the outputs of the banks. The findings also depicts that Ethiopian commercial banks have on the average cost, standard profit alternative profit and labor efficiency scores of 92.2, 68, 71.3 and 80.3 percent respectively. However, the econometric findings suggest that the alternative profit efficiency concept to be the most appropriate efficiency concept to assess the Ethiopian commercial banking industry. In view of this, the study indicates that alternative profit efficiency is affected positively by the private ownership, cheap source of deposit, larger size, higher capital size, lower risk preference of the management, longer years of operation and lower number of branches even though it deteriorated over the study period. In addition, the findings also reveal the existence of management inefficiency and output quality difference among the banks. , J



Ethiopian Commercial bank, Structure and Efficiency