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Determinants of Bank Efficiency: the case of Brazil

  • Patricia Tecles
  • Benjamin M. Tabak

This paper analyzes the efficiency of the Brazilian banking sector over the post-privatization period of 2000-2007. We employ a Bayesian stochastic frontier approach, which provides exact efficiency estimates and confidence intervals and thus, allows an accurate comparison across institutions and bank groups. The results suggest that large banks are the most cost and profit efficient, supporting the concentration process observed in recent years. Foreign banks have achieved a good performance through either the establishment of new affiliates and the acquisition of local banks. The remaining public banks have had improvements in cost efficiency, but are relatively profit inefficient. Finally, we observe a positive impact of capitalization on efficiency.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps210.pdf
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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 210.

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Date of creation: May 2010
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Handle: RePEc:bcb:wpaper:210
Contact details of provider: Web page: http://www.bcb.gov.br/?english

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