IDEAS home Printed from
   My bibliography  Save this article

Linking Managerial Behaviour to Cost and Profit Efficiency in the Banking Sectors of Central and Eastern European Countries


  • Stefania P. S. Rossi

    (University of Cagliari and University of Vienna, Doktor-Karl-Lueger-Ring 1, A-1010 Wien)

  • Markus S. Schwaiger

    (Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division, Otto-Wagner-Platz 3, A-1090 Wien, Associate Professor Wirtschaftsuniversität Wien)

  • Gerhard Winkler

    (Oesterreichische Nationalbank, Credit Division, Otto-Wagner-Platz 3, A-1090 Wien, Associate Professor Wirtschaftsuniversität Wien)


This paper analyzes cost and profit efficiency as well as the managerial behaviour of banks in nine Central and Eastern European countries, providing crosscountry and time-series evidence on the run up period to EU accession from 1995 to 2002. A stochastic frontier analysis based on a Fourier flexible form indicates a generally low level of cost and profit efficiency. We also observe an increasing tendency over time in cost and profit efficiency, with significant differences among countries. Apart from looking at the determinants of cost and profit efficiency (e.g. asset quality, problem loans, risk, and environmental factors), we test several hypotheses on banks’ managerial behaviour using a Granger causality approach. Even though a static analysis shows a negative correlation between problem loans and efficiency, we find no evidence supporting the bad management hypothesis according to which inefficiency triggers a decrease in asset quality. On the contrary results provide evidence for the bad luck hypothesis suggesting that the exogeneity of bad loans causes inefficiency.

Suggested Citation

  • Stefania P. S. Rossi & Markus S. Schwaiger & Gerhard Winkler, 2008. "Linking Managerial Behaviour to Cost and Profit Efficiency in the Banking Sectors of Central and Eastern European Countries," Credit and Capital Markets, Credit and Capital Markets, vol. 41(4), pages 589-629.
  • Handle: RePEc:kuk:journl:v:41:y:2008:i:4:p:589-629

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Vuslat Us, 2016. "Determinants of Non-Performing Loans in the Turkish Banking Sector : What Has Changed After the Global Crisis?," CBT Research Notes in Economics 1627, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    2. Us, Vuslat, 2017. "Dynamics of non-performing loans in the Turkish banking sector by an ownership breakdown: The impact of the global crisis," Finance Research Letters, Elsevier, vol. 20(C), pages 109-117.

    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
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kuk:journl:v:41:y:2008:i:4:p:589-629. 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: (Credit and Capital Markets). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.