Cost Efficiency of the Ghanaian Banking Sector: The Post-Liberalisation Experience

Abstract

Using data from 1997 to 2008, this paper investigates the cost efficiency of the Ghanaian banking sector after financial liberalisation. The Ghanaian bank with the highest efficiency score is found to be operating at maximum possible efficiency. The average bank is however operating at high costs. Despite mixed evidence in the literature, there is the received wisdom that most cross-border mergers and acquisitions post-liberalisation result in failure due to factors that include poor credit quality, inadequate generation of fee income, and poor customer mix. In Ghana, the situation is different because the only foreign-acquired bank had prior knowledge of the local conditions and has managed to utilise this advantage, coupled with redundancy programmes and layoffs and without branch expansion following the acquisition, to operate at a relatively high level of cost efficiency.