Determinants of commercial bank performance in transition - an application of data envelopment analysis
AbstractBanking 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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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 2850.
Date of creation: 30 Jun 2002
Date of revision:
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;
Other versions of this item:
- David A Grigorian & Vlad Manole, 2006. "Determinants of Commercial Bank Performance in Transition: An Application of Data Envelopment Analysis," Comparative Economic Studies, Palgrave Macmillan, vol. 48(3), pages 497-522, September.
- David A. Grigorian & Vlad Manole, 2002. "Determinants of Commercial Bank Performance in Transition: An Application of Data Envelopment Analysis," IMF Working Papers 02/146, International Monetary Fund.
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