Banking Profitability and Efficiency in Emerging Economies

Dear Colleagues,

The banking sector is still the main source of debt financing in many emerging economies. The rapid economic growth of these economies in the last two decades has stretched the ability of local banks to meet the borrowing demand from households, firms, and governments. The recent economic downturn, due to factors such as the COVID-19 pandemic and the resurgence of inflation, has led banks in emerging economies to be more selective in their lending policies in order to preserve their profitability. On top of that, the transition to a higher interest rate environment in developed economies has made the borrowing of financial resources in these markets more expensive for banks located in emerging economies. The determinants of profitability and cost-efficiency are some of the main drivers that inform the bank managements’ decision-making processes. It is therefore of paramount importance to identify these determinants of banking profitability, as well as the factors that impact banking efficiency. This would allow bank managers to measure their impact on banking profitability or efficiency indicators, as well as to implement policies that either mitigate or strengthen profitability and cost-efficiency in a rapidly changing macroeconomics environment. The number of single- or cross-country studies focusing on banking profitability and efficiency in emerging economies is still tiny relative to similar studies focusing on developed economies. Therefore, the goal of this Special Issue is to expand the current research, either in theoretical or empirical terms, by covering banking sectors located in emerging economies.

Dr. Francesco Guidi
Prof. Dr. Gabriella Cagliesi
Guest Editors

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• efficiency
• profitability
• data envelopment analysis
• stochastic frontier analysis
• structure–conduct–performance hypothesis
• emerging economies