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Cost and profit efficiency in European banks

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  • Maudos, Joaquin
  • Pastor, Jose M.
  • Perez, Francisco
  • Quesada, Javier

Abstract

The analysis of bank accounting ratios as indicators of competitiveness has been complemented and occasionally revised by the increasing use of more sophisticated indices ofefficiency. In recent years, over a hundred studies have analysed the efficiency of financial institutions, concentrating mostly on costs. However, the few available studies that estimate profitfrontier functions come up with efficiency levels that are much lower than cost efficiency levels, implying the existence of the most important inefficiencies on the revenue side. Also, few are thestudies that run comparisons at an international level, and none of these deals with profit efficiency. This paper analyses, by means of alternative techniques, both cost and profit efficiency in a sample of 11 countries of the European Union for the period 1993-1996, again obtaining profit efficiency levels lower than cost efficiency levels, as well as compatible results in the different estimation procedures used. El análisis de ratios contables como indicadores de competitividad ha sido completado y ocasionalmente revisado por la creciente utilización de indicadores más sofisticados de eficiencia. En los últimos años, más de un centenar de trabajos han analizado la eficiencia de las instituciones financieras, centrándose mayoritariamente en la vertiente de los costes. Sin embargo, los escasos estudios que estiman funciones frontera de beneficios obtienen niveles de eficiencia en beneficios mucho menores que en costes, lo que implica la existencia de importantes ineficiencias en la vertiente de los ingresos. Además, son pocos los estudios que realizan comparaciones a nivel internacional, y ninguno de ellos analiza la eficiencia en beneficios. Por ese motivo, este trabajo analiza la eficiencia en costes y beneficios en una muestra de 11 países de la Unión Europea en el periodo 1993-93 por medio de diversas técnicas frontera. Se obtienen niveles de eficiencia en beneficios inferiores que en costes, siendo este re
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Suggested Citation

  • Maudos, Joaquin & Pastor, Jose M. & Perez, Francisco & Quesada, Javier, 2002. "Cost and profit efficiency in European banks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 12(1), pages 33-58, February.
  • Handle: RePEc:eee:intfin:v:12:y:2002:i:1:p:33-58
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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