Capitalization and Efficiency of Cemac Banks: An Intermediation Approach

Abstract

This study assesses the effect of increased equity capital on the technical efficiency of CEMAC banks. With this end in view, we use panel data from seventeen banks extracted from Bankscope database (2017). The study period runs from 2014 to 2016 and the analysis is carried out in two steps. In the first step, the intermediation approach and the Data Envelopment Analysis are used respectively to choose the inputs and outputs (variables) and measure the technical efficiency of the banks. In the second step, the technical efficiency scores obtained in the first step are estimated using the Tobit model and the Maximum Likelihood estimator. The results obtained show that the fact that banks in the CEMAC sub-region increase their equity capital negatively and significantly affects their pure technical efficiency and their efficiency of scale. For this reason, our recommendations relate to the definition of prudential capital ratios, capable not only of ensuring financial security and stability but also of reducing at best the problems of information asymmetries between shareholders, managers and the creditors.