Impact of main idiosyncratic and exogenous factors on cost Efficiency: The case of MENA banking industries – SFA approach

This study explores the impact of main idiosyncratic endogenous (Capital ratio, Diversification, Liquidity, Return on equity (ROE), Banks assets’ size) and macroeconomic exogenous (Inflation rate, GDP growth rate HHI concentration index) determinants banking firm that influence banks’ cost efficiency. Using SFA (Stochastic Frontier Approach) we estimate efficiency MENA sectors through a two-stage model: i) Including factors at first stage under SFAW (SFA With) ii) excluding these SFAWO without) second stage. By using this method, versus SFAWO, compare between frontiers scores obtained understand effect integration banks in region. sample 240 observations for collected from 18 sectors, analyze whether criteria had throughout 1999-2017. We find are higher than SFAWO. Furthermore, our results show clearly selected frontier. Finally, notwithstanding ongoing fundamental changes MENA’s industries, empirical results, inefficiencies can be explained by (Assets ‘size, liquidity, profitability, etc.) which control bank managers environment (economic growth, inflation) largely depends economic, monetary financial policies adopted each country