Determinants of the Productivity Change for the Banking Sector in Egypt

Global Tensions in Financial Markets

ISBN: 978-1-78714-840-6, eISBN: 978-1-78714-839-0

ISSN: 0196-3821

Publication date: 19 March 2018

Abstract

This study aims to undertake the evaluation and examination of the productivity change of the Egyptian banking sector. Using a novel data set covering 14 banks operating in the Egyptian market from 1997 to 2013. We use a nonparametric approach (based on data envelopment analysis (DEA)) to investigate the productivity change in the Egyptian banking sector. Input-oriented Malmquist indices of productivity change are estimated with DEA to measure total factor productivity (TFP) change. The TFP changes are decomposed into the product of technological change and technical efficiency change (catch-up). In the second stage, we study potential determinants of productivity change using a regression model. We find that the Egyptian banking sector as a whole shows a productivity regress of 0.9% per year, mainly due to the technological improvements. The estimated regression model identifies some variables that significantly influence the productivity of banks in Egypt. The banks with higher loan to deposit ratio and higher returns on equity have higher productivity growth reflecting on their strong strategic and managerial skills. The size of a bank seems to be associated with an increase in productivity. The maturity of a bank (measured by age) is associated with higher productivity. The NIM and NIETA variables do not seem to be affecting the productivity of banks. Surprisingly, our results reveal that the financial crisis was negatively and statistically insignificant, hence it had no effect on the Egyptian banks.

Keywords

Citation

Jreisat, A., Hassan, H. and Shankar, S. (2018), "Determinants of the Productivity Change for the Banking Sector in Egypt", Kensinger, J. (Ed.) Global Tensions in Financial Markets (Research in Finance, Vol. 34), Emerald Publishing Limited, pp. 89-116. https://doi.org/10.1108/S0196-382120170000034011

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Emerald Publishing Limited

Copyright © 2018 Emerald Publishing Limited

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