The Structure And Efficiency Of Ethiopian Commercial Bank

Using the stochastic frontier analysis and employing the cost, standard profit, alternative profitrnand labor efficiency concepts, this study has analyzed the efficiency situations and identifiedrnthe exogenous factors affecting the inefficiencies of the Ethiopian commercial banks fromrn1994/95 to 2004/05. FUl1hermore, the study has investigated whether or not managementrninefficiency existed in the banks and the quality difference in the outputs of the banks. Thernfindings also depicts that Ethiopian commercial banks have on the average cost, standard profitrnalternative profit and labor efficiency scores of 92.2, 68, 71.3 and 80.3 percent respectively.rnHowever, the econometric findings suggest that the alternative profit efficiency concept to bernthe most appropriate efficiency concept to assess the Ethiopian commercial banking industry.rnIn view of this, the study indicates that alternative profit efficiency is affected positively by thernprivate ownership, cheap source of deposit, larger size, higher capital size, lower riskrnpreference of the management, longer years of operation and lower number of branches evenrnthough it deteriorated over the study period. In addition, the findings also reveal the existencernof management inefficiency and output quality difference among the banks.rn, J

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