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Bank efficiency in the new European Union member states: Is there convergence?

  • Mamatzakis, Emmanuel
  • Staikouras, Christos
  • Koutsomanoli-Filippaki, Anastasia

We employ the stochastic frontier approach and estimate a common frontier in order to examine cost and profit efficiency in the banking systems of the ten new European Union member states over the period 1998-2003. The results indicate a generally low level of cost and an even lower level of profit efficiency, whilst we do not observe marked differences of inefficiency scores across countries. Foreign banks outperform both state-owned and domestic private-owned banks in terms of profit efficiency, though results are less clear in the case of cost efficiency. In addition, [beta]- and [sigma]-convergence criteria indicate some convergence in cost efficiency across the new member states, yet no convergence appears to have been achieved in terms of profit efficiency.

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Article provided by Elsevier in its journal International Review of Financial Analysis.

Volume (Year): 17 (2008)
Issue (Month): 5 (December)
Pages: 1156-1172

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Handle: RePEc:eee:finana:v:17:y:2008:i:5:p:1156-1172
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620166

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