Bank Specific, Banking Sector, Macroeconomic and Democratic Determinants of Bank Efficiency in CEMAC and WAEMU Countries

This article aims to accomplish two objectives: first, to measure the efficiency scores of banks in CEMAC and WAEMU, and to identify the factors that have influenced them over the period 2008 to 2022. To achieve these goals, we opted for a modelling framework combining the fixed-effect panel models with the stochastic frontier approach (SFA). Regarding the first objective, our results reveal that banks in the CEMAC and WAEMU countries have consistently operated beneath their optimal production capacity. As for the second objective, the findings suggest that certain bank-specific, banking sector and macroeconomic factors exert positive impact on bank efficiency, while others detract it. A close examination of democracy factors indicate their negative effect on the technical efficiency of CEMAC and WAEMU banks. However, when combining the results of the two zones (CEMAC + WAEMU), control of corruption emerges as the only significant factor contributing to diminished technical efficiency of banks. This study has the merit of presenting valuable empirical evidence to inform strategic decision-making by bankers, banking market regulators and public authorities on measures to improve technical efficiency, resilience and financial soundness within the banking sector.