Does Ownership Affect the Efficiency of African Banks?

In the last few years, there has been an extensive debate as to whether ownership matters for bank performance in less developed countries. This paper investigates whether privately-owned banks outperform state-owned banks and whether foreign ownership enhances bank performance. Based on a range of performance ratios as well as parametric and non-parametric estimations, the results show that in Africa, on average, privately-owned banks do not appear to outperform state-owned banks. However, where private ownership involves foreign ownership then this does seem to have a positive effect on bank performance. Both sets of results are affected by high variance in the data suggesting that in state-owned and privately-owned banks and in domestic and foreign-owned banks there are widely differing levels of efficiency. In addition, we also test for the effects of ownership taking into account environmental, including regulatory, variables. The study reports results for banking across Africa and in two separate regions, North Africa and sub-Saharan Africa. We also test for country-level effects.