Bank Efficiency and Default in Brazil: Causality Tests
AbstractPeriods of Financial Stability are associated to low bank efficiency and high non-performing loans in credit portfolios. Therefore, this paper studies the relationship between bank efficiency and non-performing loans. To evaluate the bank efficiency, we employ a Data Envelopment Analysis. We employ the Arelano-Bond dynamic panel approach and a panel-VAR to test whether non-performing loans Granger cause bank efficiency (bad luck hypothesis) or whether bank efficiency affects loan quality (management with risk aversion). Empirical results for the Brazilian case corroborate the second hypothesis.
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Bibliographic InfoPaper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 253.
Date of creation: Oct 2011
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Web page: http://www.bcb.gov.br/?english
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-14 (All new papers)
- NEP-BAN-2011-11-14 (Banking)
- NEP-EFF-2011-11-14 (Efficiency & Productivity)
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