Open AccessDETERMINANTS OF BANK COST EFFICIENCY: EMPIRICAL EVIDENCE FROM BANGLADESH
Author(s) -
Israth Sultana,
Mohammad Morshedur Rahman
Publication year - 2020
Publication title -
international journal of banking and finance
Language(s) - English
Resource type - Journals
ISSN - 1675-722X
DOI - 10.32890/ijbf2020.15.1.9931
Subject(s) - panel data , econometrics , economics , loan , fixed effects model , endogeneity , heteroscedasticity , profitability index , market liquidity , capital adequacy ratio , bond , ordinary least squares , monetary economics , profit (economics) , finance , microeconomics
Due to the trust of depositors, banks should be responsible for efficient utilization of resources to achieve cost efficiency (CE) which in turn contributes to raising income. Previous studies found that the average CE of banks in Bangladesh was around 80%. This study aims to find the determinants of CE in Bangladesh from a sample of 33 banks during a period from 2009 to 2016. Stochastic Frontier Approach (SFA) was used to measure CE in the first stage. In the second stage, different types of regression estimations were used like pooled ordinary least square, fixed effect or random effect panel regression, System-Dynamic Panel Data Estimation and Arellano-Bond Dynamic Panel Data Estimation for comparison. The results showed that Generalized Method of Moments (GMM) specifically the ArellanoBond Dynamic Panel Data Estimation was best suited for problems of The International Journal of Banking and Finance, Vol. 15. Number 1, 2020: 39-71 39 40 The International Journal of Banking and Finance, Vol. 15, No 1, 2020 : 39-71
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