Factors affecting technical efficiency among selected universal banks in the Philippines

Paper ID: Abstract-IEESCon-2023-012

Abstract

The banking sector is the backbone of the financial system. It has a significant role in increasing the socioeconomic development of a nation. In an environment of increasingly contestable international markets, banks are therefore fighting for a boost in efficiency. Bank efficiency is the central concern in banking literature because efficiency will become the strategic variable in tackling the increasing competitive pressure and structural changes within the banking industry. Understanding bank efficiency is considered an important issue for the sustainable development of an economy. The study mainly seeks to determine the factors influencing the technical efficiency of universal banks in the Philippines. It employs a two-stage analysis wherein Data Envelopment Analysis (DEA) is utilized for the first stage in determining the level of technical efficiency scores and Tobit regression in the second stage to determine the influence of the factors affecting the level of technical efficiency. The result shows that only loan quality is statistically significant among the factors.