Determinants of the technical efficiency of WAEMU banks

This paper aims to examine the determinants of technical efficiency in the banking sectors of the eight WAEMU countries over the period 2003 to 2015. The data used in this research are collected from the balance sheets and income statement tables available in the banks' annual activity reports and BCEAO statistical data from 2003 to 2015. To estimate the level of technical efficiency of banks and analyze the determinants of technical efficiency of banks operating in the WAEMU zone, we used the heteroskedastic stochastic frontier model of Wang (2002). The estimates show that banks in WAEMU countries have an average technical efficiency level of 86% over the period considered. The analysis of the results on the determinants indicates that the decrease in bad and disputed debts and equity divided by total assets improve the level of technical efficiency of banks while the Z score has a positive effect on the level of technical efficiency of WAEMU banks over the study period from 2003 to 2015.