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Effects Of Financial Capital On Colombian Banking Efficiency

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  • DAIRO ESTRADA

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  • POLDY OSORIO

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Abstract

In this paper we discuss cost and profit efficiency on the Colombian financial market in the period 1989-2003, using stochastic frontier efficiency analysis. During the period, the cost efficient frontier deteriorates, but profit efficient frontier is relatively stable. We found significant difference when we compare the efficiency scores among different types of financial intermediaries. Additionally, our analysis shows that the scores for profit and cost efficiency have different distributions. Also, we found big differences between profit and cost efficiency among the different type of banks. This is evidence in favor of the existence of collusive behavior of some banks, which allows them to capture oligopoly rents.

Suggested Citation

  • Dairo Estrada & Poldy Osorio, 2004. "Effects Of Financial Capital On Colombian Banking Efficiency," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República - ESPE, vol. 22(47), pages 162-201, December.
  • Handle: RePEc:col:000107:002433
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    Cited by:

    1. Dairo Estrada & Angela González Arbelaéz & Javier Gutiérrez Rueda, 2008. "The Effects of Diversification on Banks’ Expected Returns," Borradores de Economia 524, Banco de la Republica de Colombia.
    2. Miguel SARMIENTOÕ & Andrés CEPEDA & Hernando MUTIS & Juan F. PÉREZ, 2013. "Nueva Evidencia sobre la Eficiencia de la Banca," Archivos de Economía 010705, Departamento Nacional de Planeación.
    3. Javier E. Pirateque & José H. Piñeros & Linda Mondragón, 2013. "Eficiencia de los establecimientos bancarios (EB): una aproximación mediante modelos DEA," BORRADORES DE ECONOMIA 011103, BANCO DE LA REPÚBLICA.
    4. Sarmiento, Miguel & Galán, Jorge E., 2017. "The influence of risk-taking on bank efficiency: Evidence from Colombia," Emerging Markets Review, Elsevier, vol. 32(C), pages 52-73.
    5. Galán, Jorge E. & Sarmiento, Miguel, 2014. "Heterogeneous effects of risk-taking on bank efficiency : a stochastic frontier model with random coefficients," DES - Working Papers. Statistics and Econometrics. WS ws142013, Universidad Carlos III de Madrid. Departamento de Estadística.
    6. Carolina Ortega Londoño, 2018. "Transmission of Monetary Policy and Bank Heterogeneity in Colombia," Documentos de Trabajo CIEF 016792, Universidad EAFIT.
    7. Diego Restrepo-Tobón & Jim Sánchez-González, 2018. "Measuring Profit Efficiency of Colombian Banks: A Composite Nonstandard Profit Function Approach," Documentos de Trabajo CIEF 016789, Universidad EAFIT.
    8. Barrientos Marín, Jorge & Tobón, David & Gutiérrez, Alderid, 2009. "Producción y eficiencia estocástica: una aplicación a la industria del calzado en Colombia," Revista Lecturas de Economía, Universidad de Antioquia - CIE, July.
    9. Diana Fernández Moreno & Dairo Estrada, 2013. "Colombian bank efficiency and the role of market structure," Temas de Estabilidad Financiera 076, Banco de la Republica de Colombia.
    10. Alejandro Ramírez Vigoya, 2015. "Ajuste de una función de producción al sector financiero en Colombia," Revista Facultad de Ciencias Económicas, Universidad Militar Nueva Granada, vol. 0(1), pages 141-156, June.
    11. Carolina Ortega Londoño & Diego Restrepo, 2018. "Transmission of Monetary Policy and Bank Heterogeneity in Colombia," Documentos de Trabajo CIEF 016987, Universidad EAFIT.

    More about this item

    Keywords

    frontier; efficiency; cost; profit; financial capital.;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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