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The cost-efficiency of French banks

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  • Jimborean, Ramona
  • Brack, Estelle

Abstract

The paper addresses the issue of French banks efficiency, compared to their homologous from Europe and the United States. The analysis is realized on a sample formed by the ten biggest banks from France, Germany, Italy, Spain, the United Kingdom and the United States, over the period 1994-2006. The Data Envelopment Analysis (DEA) method is employed. The results show an improvement in cost-efficiency of French and Spanish banks, while in the other countries a decline in cost-efficiency is noted. We proceed to several tests of convergence, showing that inefficient banks have reduced the gap during the period 1994-2006. In a second step analysis, we focus on the factors standing behind the efficiency scores obtained through DEA methodology. These are bank-specific variables, the macro environment, the regulatory regime and the non-bank financial sector development. We use a standard censured Tobit model and show that capitalized, newly established banks, with tighter ratios of Tier 1 capital and operating in a country with a lower GDP per capita record the highest cost-efficiency scores.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23471.

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Date of creation: Mar 2010
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Handle: RePEc:pra:mprapa:23471

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Keywords: Cost-efficiency; Banking systems; Data envelopment analysis;

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  19. Michel Dietsch & Ana Lozano Vivas, . "How the Environment Determines the Efficiency of Banks: A Comparison between French and Spanish Banking Industry," Center for Financial Institutions Working Papers 97-29, Wharton School Center for Financial Institutions, University of Pennsylvania.
  20. Koetter, Michael & Karmann, Alexander & Fiorentino, Elisabetta, 2006. "The cost efficiency of German banks: a comparison of SFA and DEA," Discussion Paper Series 2: Banking and Financial Studies 2006,10, Deutsche Bundesbank, Research Centre.
  21. Brack, Estelle, 2009. "États-Unis,“soupe primitive” de la crise financière
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    ," MPRA Paper 23480, University Library of Munich, Germany.
  22. David B. Humphrey, 1991. "Productivity in banking and effects from deregulation," Economic Review, Federal Reserve Bank of Richmond, issue Mar, pages 16-28.
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