Expansion and Efficiency in Banking: Evidence from Ghana

We use a translog functional form to estimate a stochastic frontier function of cost and profit efficiency (PE) of Ghanaian banks under the Battese-Coelli time-varying decaying inefficiency parameterization for (unbalanced) panel data. We regressed efficiency estimates on a distance variable controlling for bank size, total cost, and profits. We find that Ghanaian bank PE is worsening, whereas cost efficiency is improving for the period analyzed. Our results show that PE is not related to distance, size, or cost and profitability ratios. Distance is however positively and significantly related to cost efficiency. Cost efficiency is however not influenced by size or cost and profit ratios. Copyright (C) 2011 John Wiley & Sons, Ltd.