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Cost and profit efficiencies in transition banking: the case of new EU members

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  • Adnan Kasman
  • Canan Yildirim
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    Abstract

    This paper analyses cost and profit efficiencies in commercial banking in the eight Central and Eastern European countries that became new members to the European Union. Common stochastic cost and profit frontiers with country-specific variables are employed in order to take into account macro-economic and financial sector conditions that vary over time and across countries. The impact of foreign ownership on performance is also examined. The results indicate a wide range of cost and profit inefficiency scores across countries and across different size groups. All banking systems in the sample display significant levels of cost and profit inefficiency and there does not seem to be any continuous improvement in performance over time. There is also some evidence that foreign banks perform, on average, better than domestic banks.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840600639022
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    Bibliographic Info

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

    Volume (Year): 38 (2006)
    Issue (Month): 9 ()
    Pages: 1079-1090

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    Handle: RePEc:taf:applec:v:38:y:2006:i:9:p:1079-1090

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    1. Vivas, Ana Lozano, 1997. "Profit efficiency for Spanish savings banks," European Journal of Operational Research, Elsevier, vol. 98(2), pages 381-394, April.
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    7. 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.
    8. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    9. Hung-jen Wang & Peter Schmidt, 2002. "One-Step and Two-Step Estimation of the Effects of Exogenous Variables on Technical Efficiency Levels," Journal of Productivity Analysis, Springer, vol. 18(2), pages 129-144, September.
    10. Laurent Weill, 2003. "Banking efficiency in transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 569-592, 09.
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