Purpose – The purpose of this paper is to explore the issues of efficiency, economies of scale and technical change in Southern European banking. Design/methodology/approach – The flexible Fourier functional form of the stochastic cost frontier approach is used to calculate inefficiencies for a large sample of Southern European banks between 1999 and 2004. Economies of scale estimates are calculated by estimating firm-specific cost elasticities. Findings – The findings suggest that the largest sized banks are generally the least efficient banks and the smallest sized banks are the most efficient. The strongest economies of scale are displayed by Spanish banks, while the weakest economies of scale are reported by Greek banks. The impact of technical change in reducing bank costs (generally about 3 and 4 per cent per annum) does not appear to differ according to bank size. Research limitations/implications – This study does not distinguish private banks from public or mutual banks and does not account for the effect of risk on the employment of bank capital. Originality/value – The value of this paper is to provide new and recent evidence on the very important issue of efficiency and technical change in Southern European markets.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.