Modelling technical efficiency and productivity growth of UAE banks: a three-stage analytical framework
by Welcome Sibanda; Mercy Chaita
International Journal of Business Performance Management (IJBPM), Vol. 24, No. 3/4, 2023

Abstract: This study tests for technical-efficiency and total-factor-productivity-growth for a sample of 60 UAE banks during the sample period 2000-2018, a period of extensive macro-prudential deregulation, sectoral consolidation and macro-economic shocks, using unique sub-sample periods mirroring expansion, recession and slowbalisation economic-cycles. We employ the DEA and the Malmquist Total Factor Productivity Index to capture technical-efficiency frontier-shifts for a multi-input-output bank. We detect technological-change-driven total-factor-productivity-growth and pure-technical-efficiency driven technical-efficiency. Efficiency-change lags economic cycles and sub-sample splits indicate significant scale inefficiency. Further, while foreign banks are more efficient than UAE domiciled banks, irrespective of size and index used, their performance deteriorates significantly more than UAE-domiciled banks during the 2008 Global Financial Crisis. Our results cast doubt on prior evidence that output proxy-choice is critical to result-robustness, specifically for long-term productivity trends. Further, the de-biased tobit regression analysis indicates a significant correlation between technical efficiency and size, diversification, financial structure, and profitability parameters.

Online publication date: Tue, 18-Jul-2023

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