Economics and Business
ISSN 2775-9237 (Online)
Published: 14 December 2020
Does Risk-Taking Behaviour Matter for Bank Efficiency?
Florence Chepngenoh, Peter W Muriu
University of Nairobi, Kenya
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Keywords: Bank Efficiency, Credit Risk, Liquidity Risk, Capital Risk, DEA
In pursuit of financial intermediation between borrowers and savers banks are exposed to various risks which affect efficiency. Using annual panel data for the period 2010 to 2019, this paper investigates the influence of risk-taking behaviour on bank efficiency in a developing economy. Data envelopment analysis technique was used to obtain the profit efficiency scores of each bank and Tobit regression to estimate the impact of various components of bank risks on profit efficiency. Estimation results established that credit and liquidity risks, significantly influence bank efficiency. Therefore, banks should maintain quality assets and a stable liquidity position as they significantly impact on efficiency.
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