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Cost Efficiency Measurement Using Two-Stage Data Envelopment Analysis in the Czech and Slovak Banking Sectors

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  • Iveta Palečková

    (Silesian University, School of Business Administration, Department of Finance and Accounting, Karviná, Czech Republic)

Abstract

The aim of the paper is to estimate cost efficiency and its determinants of the Czech and Slovak commercial banks within the period of 2005–2015. In this paper two-stage Data Envelopment Analysis (DEA) is used. In the first stage, I estimate the relative cost efficiency applying the inputoriented model with variable return to scale and find that the Czech banks were more cost efficient than the Slovak banks. The main reason of cost inefficiency is the excess of clients’ deposits in the banks’ balance sheet. In the second stage, I use the panel data analysis and estimate the determinants of cost efficiency in the two countries. I choose 8 bank-specific and macroeconomic factors that influence cost efficiency. The results show that the larger banks with higher liquidity risk and with a lower value of the net interest margin were more efficient. It confirms the reason of ineffi ciency determined from the DEA model. Banks were highly cost efficient during the economic expansion with a lower value of the inflation rate.

Suggested Citation

  • Iveta Palečková, 2019. "Cost Efficiency Measurement Using Two-Stage Data Envelopment Analysis in the Czech and Slovak Banking Sectors," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 69(3), pages 445-466, September.
    • Handle: RePEc:aka:aoecon:v:69:y:2019:i:3:p:445-466
    Note: Research behind this paper was supported by the Czech Science Foundation within the project No. GAČR 16-17796S: “Affiliation with financial conglomerate as a determinant of performance and risk of banks”.
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    More about this item

    Keywords

    commercial bank; cost efficiency; Czech Republic; Data Envelopment Analysis; efficiency determinants; panel data analysis; Slovakia;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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