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

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

Abstract

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.

Suggested Citation

  • Mamatzakis, Emmanuel & Staikouras, Christos & Koutsomanoli-Filippaki, Anastasia, 2008. "Bank efficiency in the new European Union member states: Is there convergence?," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 1156-1172, December.
  • Handle: RePEc:eee:finana:v:17:y:2008:i:5:p:1156-1172
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