What is it about?
We investigated cost efficiencies and its relationship with risk-return behavior of banks in United Arab Emirates (U.A.E.). The major findings are that there were 10-25% inefficiencies in these banks under different cost specifications.
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Why is it important?
The study findings are useful to emerging market participants in their investment decisions, as also the policymakers and bank regulators to monitor inefficient banks in the context of revised Basel capital norms.
Perspectives
On the risk-return front, lower liquidity and lower capitalization risks coupled with higher ROE significantly improved the cost efficiencies of the banks. Further, domestic banks were relatively cost efficient than foreign banks.
Dr Ananth Rao
University of Dubai
Read the Original
This page is a summary of: Cost frontier efficiency and risk-return analysis in an emerging market, International Review of Financial Analysis, January 2005, Elsevier,
DOI: 10.1016/j.irfa.2004.10.006.
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