Msomi, Thabiso SthembisoOlarewaju, Odunayo Magret2024-09-182024-09-182022-11-02Msomi, T. S, and Olarewaju, O. M. 2022. Dynamic panel investigation of the determinants of South African commercial banks’ operational efficiency. Banks and Bank Systems. 17(4): 35-49. doi:10.21511/bbs.17(4).2022.041816-74031991-7074 (Online)https://hdl.handle.net/10321/5536Like any other business, commercial banks are greatly affected by the micro and macro-environment that operate in, no matter how large they are. Capital adequacy ratio, credit risk, money supply, inflation, the exchange rate, and the national gross domestic product have been noted to be the key determinants of bank operational efficiency. This research study looked at the operational efficiency of four large South African banks, namely, Standard Bank, Absa, Nedbank, and First National Bank. A quantitative, descriptive, correlation design was employed, and the System-Generalized Method of Moments (SYS-GMM) techniques were used and revealed that operational efficiency was positively correlated with capital adequacy ratio, credit risk, inflation, and exchange rate, and negatively correlated with profitability, money supply and GDP. SYS-GMM estimates show that capital adequacy ratio, credit risk, inflation and exchange rate positively influenced operational efficiency, while profitability, money supply (M3) and GDP had a negative influence. Thus, it is concluded that bank management should decrease administrative costs, evaluate customers’ creditworthiness before issuing loans, raise bank size as operational conditions require, boost intermediation, and anticipate inflation to operate more efficiently.17 pen1502 Banking, Finance and Investment3502 Banking, finance and investmentOperational efficiencySystem-generalized method of momentsCommercial BanksGDPBank capital adequacyCredit riskProfitabilityArticle2024-09-1810.21511/bbs.17(4).2022.04