Were MENA commercial banks resilient amidst COVID-19 shock? A multi-perspective efficiency analysis
Year: 2025
Type: article
Abstract: This study aims to investigate the impact of the COVID-19 pandemic on the operational efficiency of 81 commercial banks across the MENA region, covering the period from 2018Q3 to 2022Q3. Unlike most prior studies that rely on radial DEA approaches, we use a DEA methodology based on the Slacks-Based Measure (SBM), which accounts for input and output slacks and thus provides a more realistic assessment. We assess efficiency using four conceptual models: general intermediation, loan-focused, interest income-focused, and total income-focused, each capturing a distinct dimension of banking activities, under all orientations. Credit risk is explicitly incorporated into the estimation to provide a more accurate measure of efficiency. An event study is designed to capture efficiency shifts surrounding the pandemic period. The study finds that MENA commercial banks demonstrated resilience in sustaining efficiency during COVID-19, though this resilience is contingent upon the efficiency assessment perspective, the model orientation and the consideration of credit risk. Non-risk-adjusted volume-based models showed notable efficiency gains, driven by managerial efficiency, while adjusting for credit risk reduced these gains. Interest income-focused models revealed efficiency declines, reflecting rate cuts and borrower support measures. Total income models showed no significant changes, reflecting constrained diversification due to fee regulations during the pandemic. These results underscore the need to integrate credit risk and adopt multi-perspective frameworks for assessing banks’ efficiency during periods of disruptions.
Institution: University of Edinburgh
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $1,930
OpenAlex ID: W4416768315