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Efficiency, endogenous and exogenous credit risk in the banking systems of the Euro area

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  • Jose Pastor
  • Lorenzo Serrano

Abstract

The implantation of the Euro in 11 of the EU states has driven the big banks to expand their presence in other European countries, which may have negative consequences on their credit risk in view of the disadvantages involved in entering new markets. The aim of this study is to analyse the efficiency and the credit risk of the banks of the most important countries of the Euro area, using a one-stage parametric stochastic procedure that allows one to identify whether the behaviour towards risk of the banks analysed was more cautious or more reckless during the period analysed. The results indicate that adjustments for risk are important in the case of profit efficiency but not in the case of cost efficiency.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 15 (2005)
Issue (Month): 9 ()
Pages: 631-649

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Handle: RePEc:taf:apfiec:v:15:y:2005:i:9:p:631-649

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References

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  1. Ana Lozano Vivas & Jesús Tadeo Pastor Ciurana & José Manuel Pastor Monsálvez, 1997. "Efficiency of European banking systems: A correction by environment variables," Working Papers. Serie EC 1997-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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  5. Allen N. Berger & Robert DeYoung & Hesna Genay & Gregory F. Udell, 1999. "Globalization of financial institutions: evidence from cross-border banking performance," Working Paper Series WP-99-25, Federal Reserve Bank of Chicago.
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  16. Maudos, Joaquin & Pastor, Jose M. & Perez, Francisco & Quesada, Javier, 2002. "Cost and profit efficiency in European banks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 12(1), pages 33-58, February.
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Citations

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Cited by:
  1. Koutsomanoli-Filippaki, Anastasia I. & Mamatzakis, Emmanuel C., 2011. "Efficiency under quantile regression: What is the relationship with risk in the EU banking industry?," Review of Financial Economics, Elsevier, vol. 20(2), pages 84-95, May.
  2. Mette Asmild & Minyan Zhu, 2012. "Bank efficiency and risk during the financial crisis: Evidence from weight restricted DEA models," MSAP Working Paper Series 03_2012, University of Copenhagen, Department of Food and Resource Economics.
  3. J. David Cummins & Georges Dionne & Robert Gagné & Abdelhakim Nouira, 2006. "Efficiency of Insurance Firms with Endogenous Risk Management and Financial Intermediation Activities," Cahiers de recherche 0616, CIRPEE.
  4. Fiordelisi, Franco & Marques-Ibanez, David & Molyneux, Phil, 2011. "Efficiency and risk in European banking," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1315-1326, May.
  5. Bernardo Maggi & Marco Guida, 2011. "Modelling non-performing loans probability in the commercial banking system: efficiency and effectiveness related to credit risk in Italy," Empirical Economics, Springer, vol. 41(2), pages 269-291, October.
  6. Pasiouras, Fotios, 2008. "Estimating the technical and scale efficiency of Greek commercial banks: The impact of credit risk, off-balance sheet activities, and international operations," Research in International Business and Finance, Elsevier, vol. 22(3), pages 301-318, September.
  7. Angelo Zago & Paola Dongili, 2011. "Credit quality and technical efficiency in banking," Empirical Economics, Springer, vol. 40(2), pages 537-558, April.
  8. Anastasia Koutsomanoli-Filippaki & Emmanuel Mamatzakis, 2009. "Performance and Merton-Type Default Risk of Listed Banks in EU: a panel VAR approach," Discussion Paper Series 2009_09, Department of Economics, University of Macedonia, revised Apr 2009.
  9. Fotios Pasiouras, 2008. "International evidence on the impact of regulations and supervision on banks’ technical efficiency: an application of two-stage data envelopment analysis," Review of Quantitative Finance and Accounting, Springer, vol. 30(2), pages 187-223, February.
  10. López-Torres, Laura & Prior, Diego , 2013. "Do Parents Perceive The Technical Quality Of Public Schools? An Activity Analysis Approach," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 13(3), pages 39-60.
  11. Manlagñit, Maria Chelo V., 2011. "Cost efficiency, determinants, and risk preferences in banking: A case of stochastic frontier analysis in the Philippines," Journal of Asian Economics, Elsevier, vol. 22(1), pages 23-35, February.

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