High Corruption, Less Bank Efficiency?

This paper investigates the impact of corruption on bank efficiency. Using the stochastic frontier approach, we examine the link between corruption and cost efficiency on a broad sample of commercial banks in 126 countries over the period 2011–2018. We find evidence of a negative effect of increased corruption on bank cost efficiency. Additionally, the results show that the adverse impact of corruption on bank efficiency is observed for banks of all sizes and countries with different levels of economic development. Overall, our findings suggest that anti-corruption policy measures are important for improving efficiency in the banking system. [ABSTRACT FROM AUTHOR]