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Efficiency and technical change for Spanish banks

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  • Ana Lozano-Vivas

Abstract

Frontier cost efficiency and technical change are examined for separate panels of Spanish commercial and savings banks over 1985-91, a period in which interest rates were totally deregulated and geographical restrictions were removed. Deregulation was supposed to provide an opportunity for the Spanish banking industry to become more efficient prior to the removal of competitive barriers between countries within the EEC. Two previous studies have estimated production frontiers for the operating cost component of Spanish savings banks using a non-parametric (DEA) approach, finding a decrease in relative efficiency plus the equivalent of higher frontier costs. Operating cost accounts for only 40% of total cost. By including all costs, financial as well as operating, we determine the total cost efficiency of Spanish commercial and savings banks and their total response to deregulation. Cost efficiency is determined using a thick frontier approach while shifts in the cost frontier are determined using a time trend analysis. Our results suggest that deregulation was associated with a decrease in relative cost efficiency for commercial banks but no change for savings banks. The cost frontier shifted up for both types of institutions over 1985-91. Overall, our efficiency results paint a more positive picture regarding the effects of deregulation on the Spanish banking industry than obtained previously, although we still find similar negative effects for technical change.

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Bibliographic Info

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

Volume (Year): 8 (1998)
Issue (Month): 3 ()
Pages: 289-300

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Handle: RePEc:taf:apfiec:v:8:y:1998:i:3:p:289-300

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Cited by:
  1. International Monetary Fund, 2001. "Bank Reform and Bank Efficiency in Pakistan," IMF Working Papers 01/138, International Monetary Fund.
  2. Rezvanian, Rasoul & Mehdian, Seyed, 2002. "An examination of cost structure and production performance of commercial banks in Singapore," Journal of Banking & Finance, Elsevier, vol. 26(1), pages 79-98, January.
  3. Subal C. Kumbhakar & Ana Lozano-Vivas & C. A. Knox Lovell & Iftekhar Hasan, 1999. "The Effects of Deregulation on the Performance of Financial Institutions: The Case of Spanish Savings Banks," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-064, New York University, Leonard N. Stern School of Business-.
  4. Michiel Bijlsma & Machiel van Dijk & Marc Pomp & Cora Zonderland, 2005. "Competition in markets for life insurance," CPB Document 96, CPB Netherlands Bureau for Economic Policy Analysis.
  5. Michiel van Leuvensteijn & J.A. Bikker, 2005. "An exploration into competition and efficiency in the Dutch life insurance industry," CPB Discussion Paper 48, CPB Netherlands Bureau for Economic Policy Analysis.
  6. Fotios Pasiouras & Aggeliki Liadaki & Constantin Zopounidis, 2008. "Bank efficiency and share performance: evidence from Greece," Applied Financial Economics, Taylor & Francis Journals, vol. 18(14), pages 1121-1130.
  7. J.A. Bikker, 2003. "Efficiency and Cost Differences across Countries in a Unified EuropeanBanking Market," DNB Staff Reports (discontinued) 87, Netherlands Central Bank.
  8. Nicos C. Kamberoglou & Elias Liapis & George T. Simigiannis & Panagiota Tzamourani, 2004. "Cost Efficiency in Greek Banking," Working Papers 09, Bank of Greece.
  9. Bonaccorsi di Patti, Emilia & Hardy, Daniel C., 2005. "Financial sector liberalization, bank privatization, and efficiency: Evidence from Pakistan," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2381-2406, August.
  10. Barros, Carlos Pestana & Wanke, Peter, 2014. "Banking efficiency in Brazil," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 54-65.
  11. Tortosa-Ausina, Emili, 2003. "Nontraditional activities and bank efficiency revisited: a distributional analysis for Spanish financial institutions," Journal of Economics and Business, Elsevier, vol. 55(4), pages 371-395.

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