Relationship among cost of financial intermediation, risk, and efficiency: Empirical evidence from Bangladeshi commercial banks

The global financial crisis and stiff market competition enhance risk exposures that raise debate on the cost of intermediation supremacy banks’ efficiency. This study examines concurrent effects bank risk, efficiency Bangladeshi commercial banks. Two-Step System GMM (2GMM) estimators unbalanced dynamic panel data 32 banks from 2000 to 2016 addresses key factors rigorously in light bank-level, industry-level, macroeconomic-level phenomenon. Efficiency gains spread intermediation, risk-taking negatively affects return. Cost-efficient are taking more credit risk; however, reduce substantially. Size (cost intermediation) positively (inversely) affect (efficiency) behaviour Market enhances reduces interest spread. Finally, Nonlinear effect size is heterogeneous efficiency, follows a U-shape curve. explicitly two issues: simultaneous validated nonlinear relationship considering effect.