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What Explains Differences in Efficiency Across Russian Banks?

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  • Styrin Konstantin

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    Abstract

    A bank can be viewed as a firm that uses deposits as inputs to “produce” loans and investments. If a manager does all her best, the bank affords its production possibilities frontier. However, the manager’s incentives may not go in-line with those of the bank’s owners, and this leads to X-inefficiency. The purpose of the research is two-fold. First, we measure the X-inefficiency of Russian banks econometrically using a quarterly panel of financial statements of all Russian banks for the period 1998-2002. Second, we explain the variation in X-inefficiency among Russian banks with a number of determinants such as the diversification of ownership structure, the type of ownership, and the bank size. Our findings suggest inter alia that regulatory authorities should be cautios in interpreting raw X-inefficiency scores: a low level of X-inefficiency may be due to the lack of intermediation rather that due an efficient intermediation.

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    Bibliographic Info

    Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 01-258e-1.

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    Date of creation: 21 Apr 2005
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    Handle: RePEc:eer:wpalle:01-258e-1

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    Postal: EERC Research Network, Russia and CIS, 13, Yakira Str., suite 332, Kyiv, 04119 Ukraine
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    Postal: EERC Research Network, Russia and CIS, 13, Yakira Str., suite 332, Kyiv, 04119 Ukraine
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    Related research

    Keywords: Russia; Russian banks;

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    Cited by:
    1. Nazin, Vladimir, 2010. "Nonparametric estimates of technical efficiency of Russian banks and crisis impact," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 20(4), pages 28-52.
    2. Zuzana FungáÄová & Laura Solanko, 2009. "Risk-taking by Russian banks: Do location, ownership and size matter?," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
    3. Berger, Allen N. & Hasan, Iftekhar & Korhonen, Iikka & Zhou, Mingming, 2010. "Does diversification increase or decrease bank risk and performance? Evidence on diversification and the risk-return tradeoff in banking," BOFIT Discussion Papers 9/2010, Bank of Finland, Institute for Economies in Transition.

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