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The efficiency of emerging Europe’s banking sector before and after the recent economic crisis

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Author Info

  • George Anayiotos

    (International Monetary Fund, Washington)

  • Hovhannes Toroyan

    (Armenian State University of Economics, Yerevan)

  • Athanasios Vamvakidis

    (International Monetary Fund, Washington)

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    Abstract

    This paper provides estimates for the relative efficiency of banks in emerging Europe before the recent boom, just before the crisis, and right after the crisis, using a Data Envelopment Analysis (DEA). The results suggest that DEA efficiency scores before the recent crisis were strongly linked to the host country’s level of development; were higher for foreign-owned banks; but did not stand out for bank groups with a presence in more than one country. The results also suggest that bank efficiency increased during the precrisis boom, but fell during the crisis. Finally, foreign-owned banks in emerging Europe seem to be less efficient than their mother banks, suggesting that although they may bring some efficiency benefits to their host country, they are highly affected by the local business and operational environment.

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    File URL: http://www.ijf.hr/eng/FTP/2010/3/anayiotos-toroyan-vamvakidis.pdf
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    Bibliographic Info

    Article provided by Institute of Public Finance in its journal Financial Theory and Practice.

    Volume (Year): 34 (2010)
    Issue (Month): 3 ()
    Pages: 247-267

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    Handle: RePEc:ipf:finteo:v:34:y:2010:i:3:p:247-267

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    Related research

    Keywords: emerging Europe; macro-financial links; bank sector efficiency;

    References

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    1. Douglas D. Evanoff & Philip R. Israilevich, 1991. "Productive efficiency in banking," Economic Perspectives, Federal Reserve Bank of Chicago, issue Jul, pages 11-32.
    2. Zsófia Arvai & Karl Driessen & Ínci Ötker-Robe, 2009. "Regional Financial Interlinkages and Financial Contagion within Europe," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(6), pages 522-540, December.
    3. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
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    13. Berg, Sigbjorn Atle & Forsund, Finn R. & Hjalmarsson, Lennart & Suominen, Matti, 1993. "Banking efficiency in the Nordic countries," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 371-388, April.
    14. Tigran Poghosyan & Subal Kumbhakar, 2010. "Heterogeneity of technological regimes and banking efficiency in former socialist economies," Journal of Productivity Analysis, Springer, vol. 33(1), pages 19-31, February.
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    16. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
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