Factors affecting technical efficiency among selected universal banks in the Philippines
Keywords:
technical efficiency, universal banks, data envelopment analysis, Tobit model, PhilippinesAbstract
The banking sector is the backbone of the financial system, playing a pivotal role in fostering socioeconomic development. In an increasingly competitive global market, understanding and improving bank efficiency is essential for sustainable economic growth. This study examines the factors influencing the technical efficiency of universal banks in the Philippines from 2016 to 2021. Using a two-stage analysis, technical efficiency scores were computed through Data Envelopment Analysis (DEA), followed by a Tobit regression to determine the impact of key factors: capital adequacy, loan quality, inflation rate, and real GDP rate. The findings reveal that among these factors, only loan quality significantly affects technical efficiency, with higher loan quality ratios negatively impacting efficiency due to increased default risk. The results highlight the need for universal banks to optimize their loan portfolios while maintaining robust credit risk management. These insights provide practical implications for policymakers and banking practitioners to enhance operational efficiency and resilience in the Philippine banking sector.
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