IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Exploring the nexus between banking sector reform and performance: Evidence from newly acceded EU countries

  • Brissimis, Sophocles N.
  • Delis, Manthos D.
  • Papanikolaou, Nikolaos I.

The aim of this study is to examine the relationship between banking sector reform and bank performance - measured in terms of efficiency, total factor productivity growth and net interest margin - accounting for the effects through competition and bank risk-taking. To this end, we develop an empirical model of bank performance, which is consistently estimated using recent econometric techniques. The model is applied to bank panel data from ten newly acceded EU countries. The results indicate that both banking sector reform and competition exert a positive impact on bank efficiency, while the effect of reform on total factor productivity growth is significant only toward the end of the reform process. Finally, the effect of capital and credit risk on bank performance is in most cases negative, while it seems that higher liquid assets reduce the efficiency and productivity of banks.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 32 (2008)
Issue (Month): 12 (December)
Pages: 2674-2683

in new window

Handle: RePEc:eee:jbfina:v:32:y:2008:i:12:p:2674-2683
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. De Jonghe, Olivier & Vennet, Rudi Vander, 2008. "Competition versus efficiency: What drives franchise values in European banking?," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1820-1835, September.
  2. Balaguer-Coll, Maria Teresa & Prior, Diego & Tortosa-Ausina, Emili, 2007. "On the determinants of local government performance: A two-stage nonparametric approach," European Economic Review, Elsevier, vol. 51(2), pages 425-451, February.
  3. Allen Berger, 1994. "The Relationship Between Capital and Earnings in Banking," Center for Financial Institutions Working Papers 94-17, Wharton School Center for Financial Institutions, University of Pennsylvania.
  4. Lepetit, Laetitia & Nys, Emmanuelle & Rous, Philippe & Tarazi, Amine, 2008. "The expansion of services in European banking: Implications for loan pricing and interest margins," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2325-2335, November.
  5. Isik, Ihsan & Kabir Hassan, M., 2003. "Financial deregulation and total factor productivity change: An empirical study of Turkish commercial banks," Journal of Banking & Finance, Elsevier, vol. 27(8), pages 1455-1485, August.
  6. Uchida, Hirofumi & Tsutsui, Yoshiro, 2005. "Has competition in the Japanese banking sector improved?," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 419-439, February.
  7. Gianni De Nicoló & Abu M. Jalal & John H. Boyd, 2006. "Bank Risk-Taking and Competition Revisited: New Theory and New Evidence," IMF Working Papers 06/297, International Monetary Fund.
  8. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  9. Chen, Xiaofen, 2007. "Banking deregulation and credit risk: Evidence from the EU," Journal of Financial Stability, Elsevier, vol. 2(4), pages 356-390, March.
  10. Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, vol. 80(5), pages 1183-1200, December.
  11. Lensink, Robert & Meesters, Aljar & Naaborg, Ilko, 2008. "Bank efficiency and foreign ownership: Do good institutions matter?," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 834-844, May.
  12. Maudos, Joaquin & Fernandez de Guevara, Juan, 2004. "Factors explaining the interest margin in the banking sectors of the European Union," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2259-2281, September.
  13. Stijn Claessens & Luc Laeven, 2004. "What drives bank competition? Some international evidence," Proceedings, Federal Reserve Bank of Cleveland, pages 563-592.
  14. Subal kumbhakar & Ana Lozano-Vivas, 2005. "Deregulation and Productivity: The Case of Spanish Banks," Journal of Regulatory Economics, Springer, vol. 27(3), pages 331-351, 01.
  15. Athanasoglou, Panayiotis & Brissimis, Sophocles & Delis, Matthaios, 2005. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," MPRA Paper 32026, University Library of Munich, Germany.
  16. Wilko Bolt & Alexander F. Tieman, 2004. "Banking Competition, Risk and Regulation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(4), pages 783-804, December.
  17. Asli Demirguc-Kunt & Luc Laeven & Ross Levine, 2003. "Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation," NBER Working Papers 9890, National Bureau of Economic Research, Inc.
  18. Douglas W. Diamond & Raghuram G. Rajan, 1999. "Liquidity Risk, Liquidity Creation and Financial Fragility: A Theory of Banking," NBER Working Papers 7430, National Bureau of Economic Research, Inc.
  19. Douglas W. Diamond & Raghuram G. Rajan, . "A Theory of Bank Capital," CRSP working papers 363, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  20. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
  21. Barbara Casu & Philip Molyneux, 2000. "A Comparative Study of Efficiency in European Banking," Center for Financial Institutions Working Papers 00-17, Wharton School Center for Financial Institutions, University of Pennsylvania.
  22. Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March.
  23. Allen, Franklin & Gale, Douglas, 2004. "Competition and Financial Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 453-80, June.
  24. Drake, Leigh & Hall, Maximilian J. B., 2003. "Efficiency in Japanese banking: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 27(5), pages 891-917, May.
  25. Douglas W. Diamond & Raghuram G. Rajan, 2001. "Banks and Liquidity," American Economic Review, American Economic Association, vol. 91(2), pages 422-425, May.
  26. Saunders, Anthony & Schumacher, Liliana, 2000. "The determinants of bank interest rate margins: an international study," Journal of International Money and Finance, Elsevier, vol. 19(6), pages 813-832, December.
  27. Matutes, Carmen & Vives, Xavier, 1995. "Imperfect Competition, Risk Taking, and Regulation in Banking," CEPR Discussion Papers 1177, C.E.P.R. Discussion Papers.
  28. Shakeeb Khan & Arthur Lewbel, 2002. "Weighted and Two Stage Least Squares Estimation of Semiparametric Truncated Regression Models," Boston College Working Papers in Economics 525, Boston College Department of Economics, revised 04 Sep 2006.
  29. John H. Boyd & Gianni De Nicolã, 2005. "The Theory of Bank Risk Taking and Competition Revisited," Journal of Finance, American Finance Association, vol. 60(3), pages 1329-1343, 06.
  30. Casu, Barbara & Girardone, Claudia & Molyneux, Philip, 2004. "Productivity change in European banking: A comparison of parametric and non-parametric approaches," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2521-2540, October.
  31. Molyneux, Phil & Wilson, John O.S., 2007. "Developments in European banking," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 1907-1910, July.
  32. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
  33. Salas, Vicente & Saurina, Jesus, 2003. "Deregulation, market power and risk behaviour in Spanish banks," European Economic Review, Elsevier, vol. 47(6), pages 1061-1075, December.
  34. Heid, Frank, 2007. "The cyclical effects of the Basel II capital requirements," Journal of Banking & Finance, Elsevier, vol. 31(12), pages 3885-3900, December.
  35. Yildirim, H. Semih & Philippatos, George C., 2007. "Restructuring, consolidation and competition in Latin American banking markets," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 629-639, March.
  36. Subal C. Kumbhakar & Ana Lozano-Vivas & C. A. Knox Lovell & Iftekhar Hasan, 1999. "The Effects of Deregulation on the Performance of Financial Institutions: The Case of Spanish Savings Banks," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-064, New York University, Leonard N. Stern School of Business-.
  37. Angelini, Paolo & Cetorelli, Nicola, 2003. " The Effects of Regulatory Reform on Competition in the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 663-84, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:32:y:2008:i:12:p:2674-2683. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.