Banking Efficiency in Lebanon: An Empirical Investigation

Abstract

Problem statement: The main goal behind this study is to identify whether banks are working at full efficiency or not and spot the changes in efficiency for banks operating in Lebanon after 2007 financial crisis. Approach: This study was conducted to examine the technical efficiency of 40 banks operating in Lebanon over the two sub-periods 2002-2006 and 2006-2009 using Data Envelopment Analysis (DEA). Results: The results from DEA show that the extent of technical efficiency varies across the banks. Citibank, HSBC, BBAC, IBL and FBL are found to be working at fully technical efficiency, while RBA, HBA, BCN, SGBL, BLA and SLCB are found to be prominently inefficient. Technical efficiency is the highest in large banks and lowest in small banks. Conclusion: After 2007 financial crisis, foreign banks have suffered more with technical efficiency decreasing in foreign banks, while local banks had a significant increase in technical efficiency. Small and medium banks are found to be working at increasing returns to scale, while large banks are working at decreasing returns to scale.