Performance assessment of Nigerian banks pre and post consolidation: evidence from a Bayesian approach

Abstract

This study analyses the cost-efficiency of Nigerian banks pre and post the consolidation period. The researchers account for bank heterogeneity using the Bayesian random frontier model, which in this context provides a better fit than the traditional stochastic frontier model. From the efficiency inferences, it is shown that the cost-efficiency of Nigerian banks has increased post the consolidation period to reach its highest average of 91.21% in 2007. The study discusses the potential impact of consolidation on the efficiency results and provides direction for future research.

Keywords:

• banking consolidation
• Nigeria
• Bayesian random frontier
• cost-efficiency
• heterogeneity

Notes

The Bayesian fixed frontier model is well established in the literature and thus it will not be explained here. For more details on the model refer to Kopp et al. (1997).

For mathematical details see Tsionas (2002).