Profit and cost efficiency in the Italian banking industry (2006-2011)
AbstractThis study evaluates the cost and the profit efficiency of Italian banking sector over the period 2006-2011. Translog stochastic frontiers are used for this purpose. Following the intermediation approach, efficiency scores are computed from estimating a model with three inputs and three outputs. Results indicate that Italian banks perform well, given that the average levels of cost and profit efficiency are both around 90% and they are quite stable over time. However, there is high heterogeneity in results. Differences have been found when banks are classified by size (efficiency tends to decrease with size), legal type (cooperatives perform better than others) and area (the best performers are in the North East of the country).
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 48940.
Date of creation: 08 Aug 2013
Date of revision:
Banking; Translog Stochastic Frontiers; Cost and Profit Efficiency;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-10 (All new papers)
- NEP-BAN-2013-08-10 (Banking)
- NEP-EFF-2013-08-10 (Efficiency & Productivity)
- NEP-ORE-2013-08-10 (Operations Research)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Francisco Pérez García & Javier Quesada Ibañez & Joaquín Maudos Villarroya & José Manuel Pastor Monsálvez, 1999.
"- Cost And Profit Efficiency In European Banks,"
Working Papers. Serie EC
1999-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Maudos, Joaquin & Pastor, Jose M. & Perez, Francisco & Quesada, Javier, 2002. "Cost and profit efficiency in European banks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 12(1), pages 33-58, February.
- Simar, L. & Wilson, P.W., 1998.
"A General Methodology for Bootstrapping in Nonparametric Frontier Models,"
9811, Catholique de Louvain - Institut de statistique.
- Leopold Simar & Paul Wilson, 2000. "A general methodology for bootstrapping in non-parametric frontier models," Journal of Applied Statistics, Taylor and Francis Journals, vol. 27(6), pages 779-802.
- 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.
- Kodde, David A & Palm, Franz C, 1986.
"Wald Criteria for Jointly Testing Equality and Inequality Restriction s,"
Econometric Society, vol. 54(5), pages 1243-48, September.
- Kodde, David A. & Palm, Franz C., 1986. "Wald criteria for jointly testing equality and inequality restrictions," Open Access publications from Maastricht University urn:nbn:nl:ui:27-5750, Maastricht University.
- Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2005.
"Privatization matters: Bank efficiency in transition countries,"
Journal of Banking & Finance,
Elsevier, vol. 29(8-9), pages 2155-2178, August.
- Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2004. "Privatization matters: Bank efficiency in transition countries," BOFIT Discussion Papers 8/2004, Bank of Finland, Institute for Economies in Transition.
- Paul Wachtel & John Bonin & Iftekhar Hasan, 2004. "Privatization Matters: Bank Efficiency in Transition Countries," Working Papers 04-06, New York University, Leonard N. Stern School of Business, Department of Economics.
- John P. Bonin & Iftekhar Hasan & Paul Wachtel, 2004. "Privatization Matters: Bank Efficiency in Transition Countries," William Davidson Institute Working Papers Series 2004-679, William Davidson Institute at the University of Michigan.
- Claudia Girardone & Philip Molyneux & Edward Gardener, 2004. "Analysing the determinants of bank efficiency: the case of Italian banks," Applied Economics, Taylor and Francis Journals, vol. 36(3), pages 215-227.
- Fiordelisi, Franco & Marqués-Ibáñez, David & Molyneux, Phil, 2010.
"Efficiency and risk in european banking,"
Working Paper Series
1211, European Central Bank.
- Allen N. Berger & David B. Humphrey, 1997.
"Efficiency of Financial Institutions: International Survey and Directions for Future Research,"
Center for Financial Institutions Working Papers
97-05, Wharton School Center for Financial Institutions, University of Pennsylvania.
- 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.
- Allen N. Berger & David B. Humphrey, 1997. "Efficiency of financial institutions: international survey and directions for future research," Finance and Economics Discussion Series 1997-11, Board of Governors of the Federal Reserve System (U.S.).
- Hung-jen Wang & Peter Schmidt, 2002.
"One-Step and Two-Step Estimation of the Effects of Exogenous Variables on Technical Efficiency Levels,"
Journal of Productivity Analysis,
Springer, vol. 18(2), pages 129-144, September.
- 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.
- 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.
- Allen N. Berger & Robert DeYoung, 1995.
"Problem Loans and Cost Efficiency in Commercial Banks,"
Center for Financial Institutions Working Papers
96-01, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Berger, Allen N. & DeYoung, Robert, 1997. "Problem loans and cost efficiency in commercial banks," Journal of Banking & Finance, Elsevier, vol. 21(6), pages 849-870, June.
- 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.).
- Williams, Jonathan, 2004. "Determining management behaviour in European banking," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2427-2460, October.
- 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.
- Allen N. Berger & Loretta J. Mester, 1997.
"Inside the black box: what explains differences in the efficiencies of financial institutions?,"
Finance and Economics Discussion Series
1997-10, Board of Governors of the Federal Reserve System (U.S.).
- Berger, Allen N. & Mester, Loretta J., 1997. "Inside the black box: What explains differences in the efficiencies of financial institutions?," Journal of Banking & Finance, Elsevier, vol. 21(7), pages 895-947, July.
- Allen N. Berger & Loretta J. Mester, 1997. "Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions?," Center for Financial Institutions Working Papers 97-04, Wharton School Center for Financial Institutions, University of Pennsylvania.
- 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.
- Fitzpatrick, Trevor & McQuinn, Kieran, 2005.
"Measuring Bank Profit Efficiency,"
Research Technical Papers
3/RT/05, Central Bank of Ireland.
- H.P. Huizinga & J.H.M. Nelissen & R. Vander Vennet, 2001. "Efficiency Effects of Bank Mergers and Acquisitions," Tinbergen Institute Discussion Papers 01-088/3, Tinbergen Institute.
- Fethi, Meryem Duygun & Pasiouras, Fotios, 2010. "Assessing bank efficiency and performance with operational research and artificial intelligence techniques: A survey," European Journal of Operational Research, Elsevier, vol. 204(2), pages 189-198, July.
- Paola Dongili & Angelo Zago, 2005. "Bad loans and efficiency in Italian Banks," Working Papers 28, University of Verona, Department of Economics.
- Léopold Simar & Paul W. Wilson, 1998.
"Sensitivity Analysis of Efficiency Scores: How to Bootstrap in Nonparametric Frontier Models,"
INFORMS, vol. 44(1), pages 49-61, January.
- SIMAR, Léopold & WILSON, Paul, 1995. "Sensitivity Analysis to Efficiency Scores : How to Bootstrap in Nonparametric Frontier Models," CORE Discussion Papers 1995043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Francesca Battaglia & Vincenzo Farina & Franco Fiordelisi & Ornella Ricci, 2010. "The efficiency of cooperative banks: the impact of environmental economic conditions," Applied Financial Economics, Taylor and Francis Journals, vol. 20(17), pages 1363-1376.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.