Sisay Regassa (PhD)Sefiager Alem2025-03-042025-03-042024-08-15https://etd.aau.edu.et/handle/123456789/4427The study investigates the cost efficiency and determinants of cost efficiency among Ethiopian banks over the period 1998 -2021, by employing a translog stochastic cost frontier method. Quality of loans and financial capital are accounted for in the cost function and their impact on cost efficiency level is evaluated. The result shows that the inefficiency over the period averaged 26.88 percent. For individual banks the cost inefficiency ranges from 16.64 percent to 38.28 percent of total costs. Larger and older banks have better efficiency than smaller and younger banks. The efficiency of banks over time tends to decrease until 2020 with a slight increase in 2021. The result also shows that persistent inefficiencies that relate to operation model, structure, location and other structural factors are more important than time varying factors. In addition, over the study period banks did not show technical progress instead, though very small, there seems to be a technical regress. Finally, non-core deposits to financial assets ratio and total assets of banks are negatively associated with the transient inefficiency of banks whereas share of non- core deposits to total deposits, age, ratio of other earning assets to deposits ratio, and intermediation ratio have a positive association with transient inefficiency. Generally, smaller banks are more flexible and suited to address time varying conditions than the bigger ones.enThesis