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

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Author Info
José M. Pastor
Lorenzo Serrano

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

Volume (Year): 15 (2005)
Issue (Month): 9 (June)
Pages: 631-649
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Handle: RePEc:taf:apfiec:v:15:y:2005:i:9:p:631-649

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
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  2. Allen N. Berger & Loretta J. Mester, 1997. "Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions?," Center for Financial Institutions Working Papers 97-04, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
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  3. 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. [Downloadable!] (restricted)
  4. Pastor, JoseManuel & Perez, Francisco & Quesada, Javier, 1997. "Efficiency analysis in banking firms: An international comparison," European Journal of Operational Research, Elsevier, vol. 98(2), pages 395-407, April. [Downloadable!] (restricted)
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  5. Allen N. Berger & Robert DeYoung, 1997. "Problem loans and cost efficiency in commercial banks," Finance and Economics Discussion Series 1997-8, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  6. Allen, Linda & Rai, Anoop, 1996. "Operational efficiency in banking: An international comparison," Journal of Banking & Finance, Elsevier, vol. 20(4), pages 655-672, May. [Downloadable!] (restricted)
  7. Loretta J. Mester, 1994. "How efficient are Third District banks?," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 3-18. [Downloadable!]
  8. Berger, Allen N. & Hancock, Diana & Humphrey, David B., 1993. "Bank efficiency derived from the profit function," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 317-347, April. [Downloadable!] (restricted)
  9. Pastor, Jose M, 1999. "Efficiency and Risk Management in Spanish Banking: A Method to Decompose Risk," Applied Financial Economics, Taylor and Francis Journals, vol. 9(4), pages 371-84, August. [Downloadable!] (restricted)
  10. Allen N. Berger & Robert DeYoung & Hesna Genay & Gregory F. Udell, 2000. "Globalization of financial institutions: evidence from cross-border banking performance," Finance and Economics Discussion Series 2000-04, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  11. Berger, Allen N. & Humphrey, David B., 1991. "The dominance of inefficiencies over scale and product mix economies in banking," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 117-148, August. [Downloadable!] (restricted)
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  12. Pastor, Jose M, 2002. "Credit Risk and Efficiency in the European Banking System: A Three-Stage Analysis," Applied Financial Economics, Taylor and Francis Journals, vol. 12(12), pages 895-911, December. [Downloadable!] (restricted)
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  13. Richard S. Barr & Thomas F. Siems, 1994. "Predicting bank failure using DEA to quantify management quality," Financial Industry Studies Working Paper 94-1, Federal Reserve Bank of Dallas.
  14. Simar, L., 1991. "Estimating efficiencies from frontier models with panel data: a comparison of parametric, non-parametric and semi-parametric methods with boot strapping," CORE Discussion Papers 1991026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. David C. Wheelock & Paul W. Wilson, 1993. "Explaining bank failures: deposit insurance, regulation, and efficiency," Working Papers 1993-002, Federal Reserve Bank of St. Louis. [Downloadable!]
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  16. Rogers, Kevin E., 1998. "Nontraditional activities and the efficiency of US commercial banks," Journal of Banking & Finance, Elsevier, vol. 22(4), pages 467-482, May. [Downloadable!] (restricted)
  17. Bauer, Paul W. & Berger, Allen N. & Ferrier, Gary D. & Humphrey, David B., 1998. "Consistency Conditions for Regulatory Analysis of Financial Institutions: A Comparison of Frontier Efficiency Methods," Journal of Economics and Business, Elsevier, vol. 50(2), pages 85-114, March. [Downloadable!] (restricted)
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  18. Joseph P. Hughes & Loretta J. Mester, . "A Quality and Risk-Adjusted Cost Function for Banks: Evidence on the "Too-Big-To-Fail" Doctrine," Rodney L. White Center for Financial Research Working Papers 25-92, Wharton School Rodney L. White Center for Financial Research.
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  19. Allen N. Berger & David B. Humphrey, 1992. "Measurement and Efficiency Issues in Commercial Banking," NBER Chapters, in: Output Measurement in the Service Sectors, pages 245-300 National Bureau of Economic Research, Inc. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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 06-06, HEC Montréal, Institut d'économie appliquée. [Downloadable!]
    Other versions:
  2. 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. [Downloadable!] (restricted)
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