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Efficiency and Its Impact on the Performance of European Commercial Banks

Author

Listed:
  • 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)

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.

Suggested Citation

  • Mohsen Afsharian & Anna Kryvko & Peter Reichling, 2011. "Efficiency and Its Impact on the Performance of European Commercial Banks," FEMM Working Papers 110018, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    • Handle: RePEc:mag:wpaper:110018
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    Cited by:

    1. Mehdi Fallah Jelodar, 2016. "Prioritization of the Factors Affecting Bank Efficiency Using Combined Data Envelopment Analysis and Analytical Hierarchy Process Methods," Journal of Optimization, Hindawi, vol. 2016, pages 1-7, May.
    2. TAHTAMOUNI, Abla S. & ALOMARI, Mohammad W. & BASHAYREH, Ala & ABDELHADI, Samer, 2020. "Jordanian Banking System: Analysis Of Technical Efficiency And Performance," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 24(3), pages 23-40, September.
    3. Suvash Khanal & Bharat P. Bhatta, 2017. "Evaluating Efficiency of Personnel in Nepalese Commercial Banks," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 23(4), pages 379-394, November.

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    More about this item

    Keywords

    Data Envelopment Analysis (DEA); Efficiency; European Banks; Bank Performance;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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