American J. Finance and Accounting, Vol. 6, No. 2, 2020 171 Copyright © 2020 Inderscience Enterprises Ltd. Efficiency of Ethiopian commercial banks: using data envelopment analysis Tafa Mosisa Ijara* and Dhiraj Sharma Punjabi University, Patiala, Punjab 147002, India Email: tafamosisa2014@gmail.com Email: dhiraj.pbiuniv@gmail.com *Corresponding author Abstract: This study investigates the overall technical, pure technical and scale efficiencies of Ethiopian commercial banks from 2014 to 2018 using data envelopment analysis (DEA). The intermediation approach applied to select variables, both CCR (Charnes, Cooper and Rhodes) model and BCC (Banker, Charnes and Cooper) model used to identify the main causes of inefficiency. The study found that only two banks were consistently efficient in all measurements types and the average of overall technical, pure technical and scale efficiencies reveals that Ethiopian commercial banks were inefficient during the period. This result would have negative implications on Ethiopian economy. Moreover, their inefficiency was caused mostly by management related problems than scale related factors. Therefore, the bank managers are suggested to take appropriate action based on their respective causes of inefficiency and National Bank of Ethiopia and other regulatory bodies should enforce the policy to enhance the overall efficiency of the sector. Keywords: efficiency; commercial banks; data envelopment analysis; DEA. Reference to this paper should be made as follows: Ijara, T.M. and Sharma, D. (2020) ‘Efficiency of Ethiopian commercial banks: using data envelopment analysis’, American J. Finance and Accounting, Vol. 6, No. 2, pp.171–189. Biographical notes: Tafa Mosisa Ijara is a graduate of BA in Accounting from the Jimma University, Ethiopia in 2007 and MSc in Accounting and Finance from the Addis Ababa University, Ethiopia in 2011. He has been working as an instructor (Lecturer) in Ethiopian higher education institutions (including Madda Walabu University and Ethiopian Civil Service University) and teaching different accounting and finance courses starting from the year of his graduation. He has four published research papers in the area of finance. He is a PhD Scholar in Management in the Punjabi University Patiala, in India from 2017 to date. Dhiraj Sharma is currently working at Punjabi University, Patiala in the School of Management Studies. He is a Doctorate in the area of Banking Technology and has successfully supervised 15 PhDs in the diverse areas of Financial Management and Information Technology. He has 14 books and more than forty published research papers to his credit. Many of his books are serving as text and reference books for many post-graduate courses in Indian colleges and universities. He is also contributing as reviewer for two international journals.