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Efficiency and productivity of Greek banks in the EMU era

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  • Georgios Chortareas
  • Claudia Girardone
  • Alexia Ventouri

Abstract

We provide a characterization of the Greek banking system's efficiency and productivity under the new environment that the Economic and Monetary Union (EMU) participation implies. We consider cost and profit efficiency as well as productivity change of commercial banks using the nonparametric Data Envelopment Analysis (DEA) and the Total Factor Productivity (TFP) Malmquist Index. The period under study is 1998-2003 covering Greece's entry into the euro area in 2001 and the run-up to it. Moreover, enhanced competition along with lower inflation and interest rates has further motivated financial innovation and Off-Balance Sheet (OBS) business. Our findings suggest that cost efficiency has risen by 4.3% over the 6 years under study. Moreover, Greek banks seem to enjoy relatively high profit efficiency (on average 75%) showing an increase by 93% over 1998-2003. Similarly, productivity seems to have risen by 15% and this was mainly driven by the improvements in the performance of best-practice institutions. Our results do not show any role for OBS activities in Greek banks' efficiency. Finally, while the impact of profitability and size on efficiency and productivity yields mixed results, our empirical findings seem to corroborate previous studies in that controlling for risk preferences is important in determining bank efficiency.

Suggested Citation

  • Georgios Chortareas & Claudia Girardone & Alexia Ventouri, 2009. "Efficiency and productivity of Greek banks in the EMU era," Applied Financial Economics, Taylor & Francis Journals, vol. 19(16), pages 1317-1328.
  • Handle: RePEc:taf:apfiec:v:19:y:2009:i:16:p:1317-1328
    DOI: 10.1080/09603100802599506
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    References listed on IDEAS

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    1. Eichengreen, Barry & Gibson, Heather D, 2001. "Greek Banking at the Dawn of the New Millennium," CEPR Discussion Papers 2791, C.E.P.R. Discussion Papers.
    2. J.W.B. Bos & H. Schmiedel, 2003. "Comparing Efficiency in European Banking: a Meta Frontier Approach," Research Series Supervision (discontinued) 57, Netherlands Central Bank, Directorate Supervision.
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    Cited by:

    1. Rangkakulnuwat, Poomthan & Wang, H. Holly, 2011. "Productivity growth decomposition with FE-IV approach: Rethinking Thai commercial banks after the financial crisis," Economic Modelling, Elsevier, vol. 28(6), pages 2579-2588.

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