Measurement of Efficiency and its Drivers in the Chilean Banking Industry

During the last 30 years a series of deep trasformations positioned Chilean financial system atop of Lationamerica and Emerging Markets. In this paper we examine banks performance in 2000-2019 estimating technical efficiency. Most inference is conducted using both parametric and non-parametric efficiency scores to evaluate whether methodological selection affects empirical conclusions. Our findings suggest that the Chilean banking system achieved high efficiency levels, performing on average at 75-90\% but with no significant variations during the sample. There is an important heterogeneity between size clusters both in levels and trends with smaller banks as worst performers. Ownership (state, foreign and public trading) and size had a positive impact on efficiency. In the comparison between parametric and non parametric techniques, we find that the first yields higher levels and lower heterogeneity. In the analysis of environmental variables (size, ownership and m\&a) there are no significant differences between the two methods