Faculty Scholarship 1994 - Present

Impacts of Organizational Forms, Stock Performance and Foreign Ownership on Bank Efficiency in Jordan: A Panal Study Approach

Abstract and full paper available at http://www.erf.org.eg/html/12_AC.htm Empirical evidence to date indicates that largest inefficiencies in banking do not result from market or regulatory distortions but results directly from managerial inefficiency, which is suboptimal utilization of factor inputs by bank management. Scale inefficiency is also considered a form of managerial inefficiency since it involves the choice of inefficient output level in terms of cost minimization. Using a non-parametric methodology, this paper analyzes managerial and scale efficiencies in the Jordanian banking sector over the period 1996-2001. The results indicate that the typical Jordanian bank could obtain significant (input and cost) savings should they catch up with the best practice banks (as much as 40%). Most of the managerial inefficiency is due to scale inefficiency (output related) rather than pure technical inefficiency (input related). We also found that majorities of banks in Jordan experience increasing returns to scale in their operations. Apparently, significant economies of scale are available, could the Jordanian banks expand their operations by either internal or external growth.