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Cost efficiency of banks in transition: Evidence from 289 banks in 15 post-communist countries


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  • Steven Fries

    (European Bank of Reconstruction and Development)

  • Anita Taci

    (European Bank of Reconstruction and Development)

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    To understand the transformation of banking in the post-communist transition, this paper examines the cost efficiency of 289 banks in 15 east European countries. The findings showed that banking systems in which foreign-owned banks have a larger share of total assets record lower costs and that the association between a country’s progress in banking reform and cost efficiency is non-linear. Early stages of reform are associated with cost reductions, while costs tend to rise at more advanced stages. Private banks are more efficient than state-owned banks, but there are differences among private banks. Privatised banks with majority foreign ownership are the most efficient and those with domestic ownership are the least.

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    Bibliographic Info

    Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 86.

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    Length: 30 pages
    Date of creation: Apr 2004
    Date of revision:
    Handle: RePEc:ebd:wpaper:86

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    Keywords: Transition economies; banking; cost efficiency;

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    Cited by:
    1. Vernikov , Andrei V., 2007. "Russia's banking sector transition: Where to?," BOFIT Discussion Papers 5/2007, Bank of Finland, Institute for Economies in Transition.
    2. Maletić, Radojka & Kreća, Marija & Maletić, Predrag, 2013. "Application Of Dea Methodology In Measuring Efficiency In The Banking Sector," Economics of Agriculture, Institute of Agricultural Economics, vol. 60(4).
    3. Tomas Dvorak & Chris R. A. Geiregat, 2004. "Are the new and old EU countries financially integrated?," Department of Economics Working Papers 2004-09, Department of Economics, Williams College.
    4. Claeys, Sophie & Vander Vennet, Rudi, 2008. "Determinants of bank interest margins in Central and Eastern Europe: A comparison with the West," Economic Systems, Elsevier, vol. 32(2), pages 197-216, June.


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