Measurement of operating efficiency using stochastic cost frontier model to a sample from banks which deal with Algeria in the period 2008 to2017

Abstract

This study aims to measure the operational efficiency of a sample of seven operating banks in Algeria represented by two public banks, mixed (public-private) bank and four foreign private banks, during the period (2008-2017), econometrical study using the stochastic cost frontier model. The results show that the Algerian small banks are more efficient than the big ones in managing its costs. The study sample generally has efficiency in substitutability between its production inputs but they cannot dominate their costs through their price of inputs as they did not achieve the price elasticity of demand. These banks also did not achieve economies of scale except two small banks but they have achieved economies of scope which enable them to diversify their products.