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L’efficienza del sistema bancario italiano dal 2006 al 2010. Un’applicazione delle frontiere stocastiche
[The Efficiency of Italian Banking System over 2006-2010. An Application of the Stochastic Frontier Approach]

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  • Bonanno, Graziella

Abstract

The objective of this paper is to analyze the efficiency of the Italian Banking System over the period 2006-2010. By applying the Stochastic Frontier Approach (SFA) to a panel of 700 banks, the analysis is based on the joint estimation of a cost function and an efficiency equation (Battese and Coelli, 1995). The bank outputs are the loans, the income commission and the securities. Beside controlling variables, the efficiency equation includes an indicator of credit quality. The main results are fourfold. First, the study finds that the efficiency of the banking system ranges from 08884, observed in 2007, to 0.8713 which refers to 2009. However, cost efficiency does not show regular dynamics over time. Moreover, it indicates that the cost efficiency of cooperative banks (BCC) is always higher than that observed for other banks (SPA and popular). Third, the study suggests that the cost efficiency tends to decrease as bank size increases. Finally, as regards the role of the determinants of banks efficiency ("what makes a bank efficient"), it also shows the presence of simultaneity between efficiency and credit quality. This supports the bad management hypothesis (Berger and De Young, 1997).

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42831.

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Date of creation: 24 Nov 2012
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Handle: RePEc:pra:mprapa:42831

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Keywords: banks; mergers; cost efficiency; credit quality; stochastic frontiers; panel data;

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References

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  1. Bos, Jaap W. B. & Heid, Frank & Koetter, Michael & Kolari, James W. & Kool, Clemens J. M., 2005. "Inefficient or just different? Effects of heterogeneity on bank efficiency scores," Discussion Paper Series 2: Banking and Financial Studies 2005,15, Deutsche Bundesbank, Research Centre.
  2. Fiordelisi, Franco & Marques-Ibanez, David & Molyneux, Phil, 2011. "Efficiency and risk in European banking," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1315-1326, May.
  3. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
  4. Wang, Hung-jen & Schmidt, Peter, 2001. "One-step and two-step estimation of the effects of exogenous variables on technical efficiency levels," MPRA Paper 31075, University Library of Munich, Germany, revised Mar 2002.
  5. Allen N. Berger & Robert DeYoung, 1997. "Problem loans and cost efficiency in commercial banks," Finance and Economics Discussion Series 1997-8, Board of Governors of the Federal Reserve System (U.S.).
  6. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
  7. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  8. Cristian Barra & Sergio Destefanis & Giuseppe Lubrano Lavadera, 2011. "Risk and Regulation: The Efficiency of Italian Cooperative Banks," CSEF Working Papers 290, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  9. Francesca Battaglia & Vincenzo Farina & Franco Fiordelisi & Ornella Ricci, 2010. "The efficiency of cooperative banks: the impact of environmental economic conditions," Applied Financial Economics, Taylor & Francis Journals, vol. 20(17), pages 1363-1376.
  10. Williams, Jonathan, 2004. "Determining management behaviour in European banking," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2427-2460, October.
  11. Murray D. Smith, 2008. "Stochastic frontier models with dependent error components," Econometrics Journal, Royal Economic Society, vol. 11(1), pages 172-192, 03.
  12. Paola Dongili & Angelo Zago, 2005. "Bad loans and efficiency in Italian Banks," Working Papers 28, University of Verona, Department of Economics.
  13. Laurent Weill, 2004. "Measuring Cost Efficiency in European Banking: A Comparison of Frontier Techniques," Journal of Productivity Analysis, Springer, vol. 21(2), pages 133-152, March.
  14. Hunter, William C & Timme, Stephen G, 1995. "Core Deposits and Physical Capital: A Reexamination of Bank Scale Economies and Efficiency with Quasi-Fixed Inputs," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 165-85, February.
  15. Claudia Girardone & Philip Molyneux & Edward Gardener, 2004. "Analysing the determinants of bank efficiency: the case of Italian banks," Applied Economics, Taylor & Francis Journals, vol. 36(3), pages 215-227.
  16. Sealey, Calvin W, Jr & Lindley, James T, 1977. "Inputs, Outputs, and a Theory of Production and Cost at Depository Financial Institutions," Journal of Finance, American Finance Association, vol. 32(4), pages 1251-66, September.
  17. D. Fabbri, 1996. "La Stima di Frontiere di Costo nel Trasporto Pubblico Locale: una Rassegna e un'Applicazione," Working Papers 270, Dipartimento Scienze Economiche, Universita' di Bologna.
  18. Casu, Barbara & Girardone, Claudia, 2009. "Testing the relationship between competition and efficiency in banking: A panel data analysis," Economics Letters, Elsevier, vol. 105(1), pages 134-137, October.
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