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Bank efficiency differences in the new EU member states

  • Marko Košak


    (Faculty of Economics, University of Ljubljana)

  • Peter Zajc

    (European Investment Bank)

  • Jelena Zorić

    (Faculty of Economics, University of Ljubljana)

Registered author(s):

    This article examines bank cost efficiency for five new EU Member States from Central and Eastern Europe and the three Baltic States for the period 1996 – 2006. The banking sectors in the selected set of countries had undergone a remarkable transformation before they achieved EU membership in 2004. We study cost efficiency differences between countries as well as efficiency improvements fostered by intense legislative and regulatory changes and extensive structural and institutional reforms carried out simultaneously. By employing the SFA approach an improvement in cost efficiency was discovered in the period investigated. Some noticeable differences in average cost efficiency among banking sectors can be detected as well. Empirical results also reveal certain significant associations of cost efficiency with country level macroeconomic characteristics, structure of the banking industry, and individual bank features. Analysis of correlating factors shows that the level of competition in the banking sector plays a more important role for cost efficiency improvements than the ownership structure itself. These results might be of interest to policy makers and regulatory authorities as they may provide help in detecting policy measures to create a business environment which would further enhance the cost efficiency of CEE banks.

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    Article provided by Baltic International Centre for Economic Policy Studies in its journal Baltic Journal of Economics.

    Volume (Year): 9 (2009)
    Issue (Month): 2 (December)
    Pages: 67-90

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    Handle: RePEc:bic:journl:v:9:y:2009:i:2:p:67-90
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