Advanced Search
MyIDEAS: Login to save this paper or follow this series

Efficiency and Risk-Taking in European Banking

Contents:

Author Info

  • Franco Fiordelisi

    (University of Rome III)

  • David Marques

    (European Central Bank)

  • Phil Molyneux

    ()
    (Bangor Business School)

Abstract

The recent period of crisis in credit markets has highlighted the crucial role of bank risk taking. Our paper assesses the inter-temporal relationships among bank efficiency, capital and bank risk-taking in the EU-26 commercial banking industry between 1995 and 2007. Our results support the bad management-, luck-, cost and revenue skimping hypotheses. Overall, our paper provides evidence that higher performance (enhanced efficiency) has been not related to higher managerial skills, rather to cost and revenue skimping and bad management.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bangor.ac.uk/business/docs/BBSWP09004.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Bangor Business School, Prifysgol Bangor University (Cymru / Wales) in its series Working Papers with number 09004.

as in new window
Length: 40 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:bng:wpaper:09004

Contact details of provider:
Postal: Gwynedd LL57 2DG
Phone: +44 (0) 1248 383648
Web page: http://www.bangor.ac.uk/business/research/
More information through EDIRC

Related research

Keywords: banking risk; capital; efficiency;

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Freixas, X. & Gabillon, E., 1998. "Optimal Regulation of a Fully Insured Deposit Banking System," Papers, Toulouse - GREMAQ 98.506, Toulouse - GREMAQ.
  2. Altunbas, Yener & Liu, Ming-Hau & Molyneux, Philip & Seth, Rama, 2000. "Efficiency and risk in Japanese banking," Journal of Banking & Finance, Elsevier, Elsevier, vol. 24(10), pages 1605-1628, October.
  3. Allen N. Berger & Richard J. Herring & Giorgio P. Szegö, 1995. "The Role of Capital in Financial Institutions," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 95-01, Wharton School Center for Financial Institutions, University of Pennsylvania.
  4. Joseph P. Hughes & Loretta J. Mester, 1998. "Bank Capitalization And Cost: Evidence Of Scale Economies In Risk Management And Signaling," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 314-325, May.
  5. Bos, Jaap W. B. & Schmiedel, Heiko, 2006. "Is there a single frontier in a single European banking market?," Working Paper Series, European Central Bank 0701, European Central Bank.
  6. Gropp, R. & Vesala, J., 2001. "Deposit Insurance and Moral Hazard: Does the Counterfactual Matter?," Papers, Quebec a Montreal - Recherche en gestion 47, Quebec a Montreal - Recherche en gestion.
  7. Marshall, David A. & Prescott, Edward Simpson, 2001. "Bank capital regulation with and without state-contingent penalties," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 54(1), pages 139-184, June.
  8. Allen N. Berger & Asli Demirgüç-Kunt & Ross Levine & Joseph G. Haubrich, 2004. "Introduction: Bank concentration and competition: an evolution in the making," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, pages 433-451.
  9. Rebecca S. Demsetz & Marc R. Saidenberg & Philip E. Strahan, 1996. "Banks with something to lose: the disciplinary role of franchise value," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Oct, pages 1-14.
  10. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers, Institute for Fiscal Studies W95/17, Institute for Fiscal Studies.
  11. Matutes, Carmen & Vives, Xavier, 2000. "Imperfect competition, risk taking, and regulation in banking," European Economic Review, Elsevier, Elsevier, vol. 44(1), pages 1-34, January.
  12. Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, Elsevier, vol. 29(4), pages 1450-1460.
  13. Sophocles N. Brissimis & Manthos D. Delis & Nikolaos I. Papanikolaou, 2008. "Exploring the Nexus between Banking Sector Reform and Performance: Evidence from Newly Acceded EU Countries," Working Papers, Bank of Greece 73, Bank of Greece.
  14. Yener Altunbas & Santiago Carbo & Edward P.M. Gardener & Philip Molyneux, 2007. "Examining the Relationships between Capital, Risk and Efficiency in European Banking," European Financial Management, European Financial Management Association, European Financial Management Association, vol. 13(1), pages 49-70.
  15. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers, Centre for Economic Performance, LSE dp0007, Centre for Economic Performance, LSE.
  16. Salas, Vicente & Saurina, Jesus, 2003. "Deregulation, market power and risk behaviour in Spanish banks," European Economic Review, Elsevier, Elsevier, vol. 47(6), pages 1061-1075, December.
  17. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, Econometric Society, vol. 37(3), pages 424-38, July.
  18. Dietsch, Michel & Lozano-Vivas, Ana, 2000. "How the environment determines banking efficiency: A comparison between French and Spanish industries," Journal of Banking & Finance, Elsevier, Elsevier, vol. 24(6), pages 985-1004, June.
  19. Casu, Barbara & Girardone, Claudia, 2009. "Testing the relationship between competition and efficiency in banking: A panel data analysis," Economics Letters, Elsevier, Elsevier, vol. 105(1), pages 134-137, October.
  20. Richard Blundell & Steve Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers, Institute for Fiscal Studies W00/12, Institute for Fiscal Studies.
  21. Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 5-27, July.
  22. Bhattacharya, Sudipto & Boot, Arnoud W A & Thakor, Anjan V, 1998. "The Economics of Bank Regulation," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 30(4), pages 745-70, November.
  23. Besanko, David & Kanatas, George, 1996. "The Regulation of Bank Capital: Do Capital Standards Promote Bank Safety?," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 5(2), pages 160-183, April.
  24. Stefan Gerlach & Katrin Assenmacher-Wesche, 2006. "Interpreting Euro area inflation at high and low frequencies," BIS Working Papers, Bank for International Settlements 195, Bank for International Settlements.
  25. W. Frame & Tim Coelli, 2001. "U.S. Financial Services Consolidation: The Case of Corporate Credit Unions," Review of Industrial Organization, Springer, Springer, vol. 18(2), pages 229-241, March.
  26. Wall, Larry D. & Peterson, David R., 1987. "The effect of capital adequacy guidelines on large bank holding companies," Journal of Banking & Finance, Elsevier, Elsevier, vol. 11(4), pages 581-600, December.
  27. Simon Kwan & Robert Eisenbeis, 1997. "Bank Risk, Capitalization, and Operating Efficiency," Journal of Financial Services Research, Springer, Springer, vol. 12(2), pages 117-131, October.
  28. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, Springer, vol. 20(2), pages 325-32.
  29. João A. C. Santos, 2000. "Bank capital regulation in contemporary banking theory: a review of the literature," BIS Working Papers, Bank for International Settlements 90, Bank for International Settlements.
  30. Berger, Allen N, et al, 2004. "Bank Concentration and Competition: An Evolution in the Making," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 36(3), pages 433-51, June.
  31. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 53-78, July.
  32. Bos, J.W.B. & Koetter, M. & Kolari, J.W. & Kool, C.J.M., 2009. "Effects of heterogeneity on bank efficiency scores," European Journal of Operational Research, Elsevier, Elsevier, vol. 195(1), pages 251-261, May.
  33. Sathye, Milind, 2001. "X-efficiency in Australian banking: An empirical investigation," Journal of Banking & Finance, Elsevier, Elsevier, vol. 25(3), pages 613-630, March.
  34. Lepetit, Laetitia & Nys, Emmanuelle & Rous, Philippe & Tarazi, Amine, 2008. "Bank income structure and risk: An empirical analysis of European banks," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(8), pages 1452-1467, August.
  35. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  36. Shrieves, Ronald E. & Dahl, Drew, 1992. "The relationship between risk and capital in commercial banks," Journal of Banking & Finance, Elsevier, Elsevier, vol. 16(2), pages 439-457, April.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bng:wpaper:09004. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Huw Hughes).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.