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Determinants of commercial bank performance in transition - an application of data envelopment analysis

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Author Info
Grigorian, David A.
Manole, Vlad

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Abstract

Banking sectors in transition economies have experienced major transformations throughout the 1990s. While some countries have been successful in eliminating underlying distortions and restructuring their financial sectors, in some cases financial sectors remain underdeveloped and the rates of financial intermediation continue to be quite low. The authors estimate indicators of commercial bank efficiency by applying a version of Data Envelopment Analysis (DEA) to bank-level data from a wide range of transition countries. They further extend the analysis by explaining the differences in efficiency between financial institutions and countries by a variety of macroeconomic, prudential, and institutional variables. In addition to stressing the importance of some bank-specific variables, the censored Tobit analysis suggests that: 1) Foreign ownership with controlling power and enterprise restructuring enhance commercial bank efficiency. 2) The effects of prudential tightening on the efficiency of banks vary across different prudential norms. 3) Consolidation is likely to improve efficiency of banking operations. Overall, the results confirm the usefulness of DEA for transition-related applications and may shed light on the optimal architecture of a banking system.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2850.

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Date of creation: 30 Jun 2002
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Handle: RePEc:wbk:wbrwps:2850

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Keywords: Payment Systems&Infrastructure; Financial Crisis Management&Restructuring; Environmental Economics&Policies; Banks&Banking Reform; Fiscal&Monetary Policy; Economic Theory&Research; Banks&Banking Reform; Financial Crisis Management&Restructuring; Environmental Economics&Policies; Financial Intermediation;

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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.:
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(explanations, 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.)

  1. Dániel Holló & Márton Nagy, 2006. "Bank Efficiency in the Enlarged European Union," BIS Papers chapters, in: Bank for International Settlements (ed.), The banking system in emerging economies: how much progress has been made?, volume 28, pages 217-35 Bank for International Settlements. [Downloadable!]
  2. Nikolay Nenovsky & Petar Chobanov & Gergana Mihaylova & Darina Koleva, 2008. "Efficiency of the Bulgarian Banking System: Traditional Approach and Data Envelopment Analysis," ICER Working Papers 22-2008, ICER - International Centre for Economic Research. [Downloadable!]
  3. Nikolay Nenovsky & Martin Ivanov & Gergana Mihaylova, 2008. "The Evolution of Bulgarian Banks' Efficiency During the Twenties: A Dea Approach," Working Papers 82, Bank of Greece. [Downloadable!]
  4. Gabriel Asaftei & Subal Kumbhakar, 2008. "Regulation and efficiency in transition: the case of Romanian banks," Journal of Regulatory Economics, Springer, vol. 33(3), pages 253-282, June. [Downloadable!] (restricted)
  5. Delis, Manthos D & Papanikolaou, Nikolaos I, 2009. "Determinants of bank efficiency: Evidence from a semi-parametric methodology," MPRA Paper 13893, University Library of Munich, Germany. [Downloadable!]
  6. Denise McEachern & Joseph Paradi, 2007. "Intra- and inter-country bank branch assessment using DEA," Journal of Productivity Analysis, Springer, vol. 27(2), pages 123-136, April. [Downloadable!] (restricted)
  7. Fotios Pasiouras, 2008. "International evidence on the impact of regulations and supervision on banks’ technical efficiency: an application of two-stage data envelopment analysis," Review of Quantitative Finance and Accounting, Springer, vol. 30(2), pages 187-223, February. [Downloadable!] (restricted)
  8. Daniel Stavarek, 2005. "Efficiency of Banks in Regions at Different Stage of European Integration Process," Finance 0502020, EconWPA. [Downloadable!]
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  11. Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2004. "Bank performance, efficiency and ownership in transitition countries," BOFIT Discussion Papers 7/2004, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
    Other versions:
  12. Vlad Manole & David A. Grigorian, 2005. "A Cross-Country Non-Parametric Analysis of Bahrain's Banking Sector," IMF Working Papers 05/117, International Monetary Fund. [Downloadable!]
  13. Bank for International Settlements, 2006. "The banking system in emerging economies: how much progress has been made?," BIS Papers, Bank for International Settlements, number 28, Janvier-M. [Downloadable!]
  14. Jaap W. B. Bos & Heiko Schmiedel, 2006. "Is there a single frontier in a single European banking market?," Working Paper Series 701, European Central Bank. [Downloadable!]
    Other versions:
  15. Aysan, Ahmet Faruk & Ceyhan, Sanli Pinar, 2007. "What Determines the Banking Sector Performance in Globalized Financial Markets: The Case of Turkey?," MPRA Paper 5495, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  16. G. Lanine & R. Vander Vennet, 2006. "Microeconomic determinants of acquisitions of Eastern European banks by Western European banks," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/414, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  17. Kiril Tochkov & Nikolay Nenovsky, 2009. "Efficiency of commercial banks in Bulgaria in the wake of EU accession," ICER Working Papers 21-2009, ICER - International Centre for Economic Research. [Downloadable!]
  18. Anastasia Koutsomanoli-Filippaki & Emmanuel Mamatzakis, 2008. "Banking Inefficiency in Central and Eastern European countries under a Quadratic Loss Function," Discussion Paper Series 2008_11, Department of Economics, University of Macedonia, revised Sep 2008. [Downloadable!]
    Other versions:
  19. Claessens, Stijn & van Horen, Neeltje, 2009. "Being a foreigner among domestic banks: Asset or liability?," MPRA Paper 13467, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  20. Jaroslav Borovicka, 2007. "Banking Efficiency and Foreign Ownership in Transition: Is There Evidence of a Cream-Skimming Effect?," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 13, pages 68-82, June. [Downloadable!]
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