Bank efficiency in transition economies: recent evidence from South-Eastern Europe
AbstractThis study examines the cost and profit efficiency of banking sectors in six transition countries of South-Eastern Europe over the period 1998–2008. Using the stochastic frontier approach, our analysis reveals that the average cost efficiency of SEE banks is 68.59% and the average profit efficiency is 53.87%. The second-stage regressions on the determinants of bank efficiency further show that foreign banks are associated with higher profit efficiency but moderately lower cost efficiency. Government banks are associated with lower profit efficiency. The efficiency gap between foreign banks, domestic private banks and government banks, however, has narrowed over time. We also find that the degree of individual banks’ competitiveness has a positive association with both cost and profit efficiency. Finally, institutional development, proxied by progress in banking reforms, privatization and corporate governance restructuring, also has a positive impact on bank efficiency.
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Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 5/2011.
Length: 43 pages
Date of creation: 14 Mar 2011
Date of revision:
transition banking; bank efficiency; foreign ownership; institutional development;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- P30 - Economic Systems - - Socialist Institutions and Their Transitions - - - General
- P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
- P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-26 (All new papers)
- NEP-BAN-2011-03-26 (Banking)
- NEP-EFF-2011-03-26 (Efficiency & Productivity)
- NEP-TRA-2011-03-26 (Transition Economics)
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