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Explaining Efficiency Differences Among Large German and Austrian Banks

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  • David Hauner

Abstract

Cost-efficiency, scale efficiency, and productivity change are estimated by data envelopment analysis; and cost-efficiency is regressed on explanatory variables. No evidence is found for average productivity responding to deregulation over the period studied. State-owned banks are found to be more cost-efficient (likely owing to cheaper funds) and cooperative banks to be about as cost-efficient as private banks. Increasing economies of scale but decreasing economies of scope provide rationale for M&As among banks with similar product portfolios. Interbank and capital market funding is found to be more cost-efficient than deposits when the cost of retail networks is controlled for.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/140.

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Length: 23
Date of creation: 01 Aug 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/140

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Keywords: Banks; Productivity; Economic models; banking; statistics; linear programming; banking systems; data envelopment analysis; banking system; regression analysis; descriptive statistics; standard deviation; banking sector; banking industry; samples; functional form; random errors; heteroscedasticity; banking sectors; missing data; probability; banking supervision; bank management; statistic; standard errors; national bank; independent variables; standard error; banker; central tendencies; survey; estimation technique; bank deposits; return on assets; econometrics; banking market; computation; covariances; interest expense; bank ownership; mathematical programming; minimization; sample size; bank activities;

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References

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  1. Lang, Gunter & Welzel, Peter, 1996. "Efficiency and technical progress in banking Empirical results for a panel of German cooperative banks," Journal of Banking & Finance, Elsevier, Elsevier, vol. 20(6), pages 1003-1023, July.
  2. Altunbas, Yener & Evans, Lynne & Molyneux, Philip, 2001. "Bank Ownership and Efficiency," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 33(4), pages 926-54, November.
  3. Allen, Linda & Rai, Anoop, 1996. "Operational efficiency in banking: An international comparison," Journal of Banking & Finance, Elsevier, Elsevier, vol. 20(4), pages 655-672, May.
  4. Allen N. Berger & Loretta J. Mester, 1997. "Inside the black box: what explains differences in the efficiencies of financial institutions?," Working Papers 97-1, Federal Reserve Bank of Philadelphia.
  5. Seiford, Lawrence M. & Thrall, Robert M., 1990. "Recent developments in DEA : The mathematical programming approach to frontier analysis," Journal of Econometrics, Elsevier, Elsevier, vol. 46(1-2), pages 7-38.
  6. Allen Berger & Timothy Hannan, 1994. "The Efficiency Cost of Market Power in the Banking Industry: A Test of the 'Quiet Life' and Related Hypotheses," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 94-29, Wharton School Center for Financial Institutions, University of Pennsylvania.
  7. Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 1993. "The Measurement of Productive Efficiency: Techniques and Applications," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195072181, October.
  8. Francisco Pérez García & Javier Quesada Ibañez & José Manuel Pastor Monsálvez, 1995. "Efficiency Analysis In Banking Firms: An International Comparison," Working Papers. Serie EC, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 1995-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. George Sheldon, 1994. "Nichtparametrische Messung des technischen Fortschritts im Schweizer Bankensektor," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), Swiss Society of Economics and Statistics (SSES), vol. 130(IV), pages 691-707, December.
  10. José Manuel Pastor Monsálvez, 1999. "- Credit Risk And Efficiency In The European Banking Systems: A Three-Stage Analysis," Working Papers. Serie EC, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 1999-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  11. Grifell-Tatje, E. & Lovell, C. A. K., 1997. "The sources of productivity change in Spanish banking," European Journal of Operational Research, Elsevier, Elsevier, vol. 98(2), pages 364-380, April.
  12. Vander Vennet, Rudi, 2002. "Cost and Profit Efficiency of Financial Conglomerates and Universal Banks in Europe," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 34(1), pages 254-82, February.
  13. Berger, Allen N. & Humphrey, David B., 1991. "The dominance of inefficiencies over scale and product mix economies in banking," Journal of Monetary Economics, Elsevier, Elsevier, vol. 28(1), pages 117-148, August.
  14. Mukherjee, Kankana & Ray, Subhash C. & Miller, Stephen M., 2001. "Productivity growth in large US commercial banks: The initial post-deregulation experience," Journal of Banking & Finance, Elsevier, Elsevier, vol. 25(5), pages 913-939, May.
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