Capital requirements and pressure on the technical efficiency of banks in the West African Economic and Monetary Union
Principal Investigator(s): View help for Principal Investigator(s) Richard Kuessi, University of Lome
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Project Citation:
Kuessi, Richard. Capital requirements and pressure on the technical efficiency of banks in the West African Economic and Monetary Union. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2022-12-20. https://doi.org/10.3886/E183612V1
Project Description
Summary:
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This paper analyzes the role of capital
requirements in the evolution of the level of technical efficiency and behavior
of banks in the West African Economic and Monetary Union. We use a panel data
set of 141 banks from 2000 to 2018. Using the stochastic frontier method, a fixed-effects
regression model, and simultaneous equation estimators (2sls and 3sls), we show
that capital requirements promote the technical efficiency of banks in the West
African Economic and Monetary Union. The results highlight the beneficial role
of regulatory pressure on the risk-taking and efficiency of banks. We conclude
that the regulatory stress linked to capital requirements contributes to
improving the level of efficiency of banks by discouraging and reducing risk-taking.
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