Estimating Global Cost Frontier Shift and Global Cost Malmquist Indices of Firms: An Application to Ghanaian Banks

Abstract

This study proposes a novel Global Cost Malmquist Index (GCMI) to assess productivity changes for firms, incorporating both cost efficiency and technological change from a global perspective. The GCMI extends existing productivity measures by considering cost factors and providing a comprehensive view across all firms and time periods. Applied to the Ghanaian banking sector from 2000 to 2022, the GCMI revealed an average annual productivity decline of 5.5%. This decline can be attributed to regulatory reforms, economic instability, the financial sector clean-up, and global events like the 2008 financial crisis and the COVID-19 pandemic. The comparative analysis demonstrated the GCMI's superior sensitivity to short-term productivity shifts compared to existing cost measures. This research contributes to productivity measurement literature and provides valuable insights for policymakers and bank managers in developing economies. The GCMI offers a more nuanced understanding of banking sector performance, enabling more informed decision making and targeted interventions to enhance productivity and competitiveness.