Comparative analysis of technical efficiency of listed and unlisted Banks in Ghana

Abstract

Financial institutions are the main intermediation channels between saving and investment in a country. Bank efficiency allows for mobilizing of savings from diverse sources and allocate it to more productive activities for economic growth. This study carries out a comparative analysis of technical efficiency for listed and unlisted banks in Ghana. Using panel annual financial data from eleven (11) banks starting from 2009 to 2013, the study employed the Stochastic Frontier Approach to estimate technical efficiency of the listed banks and the technical efficiency of the banks not listed. The study found that on the average, banks not listed on GSE are more efficient than listed banks. Foreign banks were more efficient than domestic banks. Bank-specific factors like the liquidity ratio, assets tangibility and profitability had a direct effect on both listed and unlisted banks. Increase in money supply will lead to increase in the efficiency level of both categories of banks. The study proposed that Bank of Ghana should consider reducing the banks required reserves with the Bank of Ghana to increase money supply and improve efficiency of banks. Bank managers are advised to maintain high level of liquidity in their operations to improve the efficiency of banks.