Does The Use Of Derivatives Increase Bank Efficiency? Evidence From Latin American Banks

Abstract

This study investigates whether the use of derivatives by banks in Latin America affect their efficiency. Overall, and in line with theory, the results indicate that the use of derivatives increases the efficiency of Latin American banks. Additionally, we find that as Latin American banks get larger their efficiency levels increases. Lastly, the results show that regulatory and institutional constraints negatively affect the efficiency of Latin American banks.