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Efficiency and Its Impact on the Performance of European Commercial Banks

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  • Mohsen Afsharian

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Anna Kryvko

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Peter Reichling

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

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    Abstract

    The paper empirically analyzes the impact of the degree of efficiency on key performance fig-ures of publicly traded European banks in the period from 2005 to 2009. Efficiency is meas-ured by constructing non-parametric frontiers using the technique of data envelopment analysis on the cost, revenue, and profit sides. Decomposition of overall efficiency provides a detailed insight into effective risk and performance drivers in the banking industry. The results of our paper suggest that an increase in pure technical efficiency is related to more volatile assets, which is reflected in lower market values. Allocative and scale efficiency, however, boost capi-tal market performance.

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    File URL: http://www.fww.ovgu.de/fww_media/femm/femm_2011/2011_18.pdf
    File Function: First version, 2011
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    Bibliographic Info

    Paper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 110018.

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    Length: 38 pages
    Date of creation: Aug 2011
    Date of revision:
    Handle: RePEc:mag:wpaper:110018

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    Fax: (0391) 67-12 120
    Web page: http://www.ww.uni-magdeburg.de
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    Related research

    Keywords: Data Envelopment Analysis (DEA); Efficiency; European Banks; Bank Performance;

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    References

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