Determinants of bank efficiency in Mexico: a two-stage analysis

Abstract

This article analyses the developments and main determinants of bank efficiency in the Mexican banking industry during 2001–2009. The Data Envelopment Analysis (DEA) methodology is applied to obtain efficiency estimates and then a Tobit model is run to find its main determinants. The first result indicates that the Mexican banking sector experienced average inefficiencies for the period of study of 15%, 29% and 14% for Technical Efficiency (TE), Pure Technical Efficiency (PTE) and Scale Efficiency (SE), respectively. Furthermore, the main determinants of increased bank efficiency are loan intensity, Gross Domestic Product (GDP) growth and foreign ownership.