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Intermediation Efficiency of Banks in South-East Europe: An Empirical Assessment Using Dea and Malmquist Index

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  • Valentin Z. Toci

    (University of Prishtina, Fakulteti Ekonomik pn, Prishtina, 10000, Republic of Kosovo)

  • Iraj Hashi

    (Staffordshire University, Leek Road, Stoke on Trent,ST4 2DF, United Kingdom)

Abstract

By employing non-parametric methods, namely Data Envelopment Analysis and Malmquist Index, this paper investigates efficiency of banks using a database of almost all banks in four countries inSouth-East Europe. The superior efficiency of foreign-owned banks in intermediation is supported. It is argued that the improvement in efficiencyof banks originated from the change in technology rather than scale and technical efficiency, and banks on average have not been able to catch-up with best-performers, thus widening the efficiency gap. The largest sources of inefficiency are found to be cost and scale inefficiencies and lending shortfalls. Because of its peculiarities, Kosovobanking sector is assessed relative to other economies. Findings suggest that despite some improvements, the banking system in Kosovo remained less efficient. Anumber of policy implications emanate from the findings,aiming at enhancing the intermediation efficiency of banksin the context of South-East European transition.

Suggested Citation

  • Valentin Z. Toci & Iraj Hashi, 2013. "Intermediation Efficiency of Banks in South-East Europe: An Empirical Assessment Using Dea and Malmquist Index," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 2(3), pages 01-20, July.
    • Handle: RePEc:rbs:ijfbss:v:2:y:2013:i:3:p:01-20
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    2. Nurboja, Bashkim & Košak, Marko, 2017. "Banking efficiency in South East Europe: Evidence for financial crises and the gap between new EU members and candidate countries," Economic Systems, Elsevier, vol. 41(1), pages 122-138.
    3. Zogjani, Jeton & Kovaci-Uruci, Fife, 2023. "History and development of the banking sector in Kosovo," MPRA Paper 115930, University Library of Munich, Germany.

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