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The Determinants of Bank Efficiency and Productivity Growth in the Central and Eastern European Banking Systems

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  • Alin Marius Andries

Abstract

In this paper we examine the determinants of the efficiency and productivity of the banking systems of seven central and east European countries during a five-year period, from 2004 to 2008. Two approaches are used to examine the efficiency of the banking industry in central and east European countries: stochastic frontier analysis and data envelopment analysis. The empirical results show that the average efficiency of banks in central and east European countries grew in the period analyzed. The improvement may be due to increased competition upon EU accession and the entry of foreign banks, as well as to extensive legislative changes that led banks to become more efficient. Based on the results, we see that the highest level of technical efficiency is recorded for the banking systems of Romania and the Czech Republic, and the lowest is recorded for Slovenia. Looking at the average efficiency scores for each country, we observe significant variation across the banking systems of the central and east European countries. Technical efficiency value estimates with the stochastic frontier analysis method range from 0.6275 in Slovakia to 0.8644 in Romania. To assess the level of productivity growth of the banking industry, a Malmquist productivity index is calculated using linear programming. In the analyzed period, on average, the productivity of banks had increased in 2008 by approximately 24.27 percent from 2004, an increase due especially to technological modification.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Eastern European Economics.

Volume (Year): 49 (2011)
Issue (Month): 6 (November)
Pages: 38-59

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Handle: RePEc:mes:eaeuec:v:49:y:2011:i:6:p:38-59

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=106044

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Cited by:
  1. Mogoseanu Daniela Bianca, 2013. "Comparative Study On The Level Of Efficiency And Its Determinants For The Manufacturing Industry In Central And Eastern Europe," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 1(41), pages 186-196.
  2. Cosmin Eugen ENACHE, 2012. "The efficiency of expenditure-related redistributive policies in the European countries," Timisoara Journal of Economics, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 5(18), pages 380-394.
  3. Mihăiță-Cosmin M. Popovici, 2013. "Latest Challenges In Efficiency Convergence In Balkan And Baltic Countries," Network Intelligence Studies, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 2, pages 110-118, October.
  4. repec:cmj:journl:y:2013:i:27:popovicimc is not listed on IDEAS
  5. Twaha, Koire & Rashid, Abdul, 2012. "Exploring the determinants of the productivity of microfinance institutions in India," MPRA Paper 45715, University Library of Munich, Germany.

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