An empirical analysis of peruvian municipal banks using cost-efficiency frontier approaches

This paper compares alternative frontier techniques to measure cost-efficiency and analyzes explanatory variables for Peruvian Municipal Banks (PMBs) from 1994 to 1999. Consistency of results from parametric and non-parametric cost frontier approaches is tested. Banks performing well and those performing poorly are identified. Furthermore, the departure of German technical assistance is tested for its efficiency effects. Mid-sized PMBs appear as the most efficient, while one old large one and another small young one are the least. Discrepancies in ranks appear in the middle positions. Bank location, size, and productivity are significant determinants. Financial management and performance are correlated to efficiency. Regulation must reinforce financial management and performance. © Canadian Association for the Study of International Development, 2009.