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Institutions and Bank Performance: A Stochastic Frontier Analysis

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  • Robert Lensink
  • Aljar Meesters

Abstract

type="main" xml:lang="en"> This article investigates the impact of institutions on bank efficiency and technology, using a stochastic frontier analysis of a data set of 7,959 banks across 136 countries over 10 years. The results confirm the importance of well-developed institutions for the efficient operation of commercial banks. Furthermore, the insights reveal the impact of institutional reforms in improving bank efficiency. The results are robust to adjustments in country-specific effects, achieved by including country dummies, as well as across different risk profiles. Moreover, they provide empirical evidence in support of the public view of the banking sector.

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  • Robert Lensink & Aljar Meesters, 2014. "Institutions and Bank Performance: A Stochastic Frontier Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(1), pages 67-92, February.
    • Handle: RePEc:bla:obuest:v:76:y:2014:i:1:p:67-92
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