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Efficiency of European banking systems: A correction by environment variables

Author

Listed:
  • Ana Lozano Vivas

    (Dpto. Economía y Admon. de Empresas)

  • Jesús Tadeo Pastor Ciurana

    (Universidad de Alicante)

  • José Manuel Pastor Monsálvez

    (Instituto Valenciano de Investigaciones Económicas)

Abstract

In this paper we extend the efficiency cross-country comparisons to ten European countries in order to know how different or similar current banking performances are. We start with two types of comparisons. First of all, we evaluate the average technical efficiency of each country by means of a DEA model called "basic" model. This model includes only banking variables. Our second model, called "complete", does consider environmental variables together with the banking variables of the basic model. The empirical results recommended us to substitute the original environmental variables with new codified variables. Finally, the non homogeneity of the country-samples, observed after performing an individual DEA analysis for each country, was decisive for considering two new models, based on a modified sample. The comparisons between the last two models show that the country specific environmental conditions exercise a strong influence over the average efficiency score of each country. El objetivo de este trabajo es comparar la eficiencia de diez países europeos. Para ello, el trabajo comienza con dos tipos de modelos. El primero analiza la eficiencia técnica media de cada país por medio de un modelo DEA que denominamos “modelo básico” y que incluye sólo variables bancarias. El segundo, llamado “modelo completo” incluye variables ambientales junto con las variables bancarias del modelo básico. Los resultados obtenidos en este segundo modelo recomendaron sustituir las variables ambientales originales por unas nuevas variables codificadas. Finalmente, la heterogeneidad de las muestras por países, observada después de realizar un análisis individual por país, lleva a considerar dos nuevos modelos, basados ambos en el modelo codificado. Las comparaciones entre estos dos modelos muestran que las condiciones ambientales de cada país ejercen una influencia muy fuerte en la eficiencia media de cada país.

Suggested Citation

  • Ana Lozano Vivas & Jesús Tadeo Pastor Ciurana & José Manuel Pastor Monsálvez, 1997. "Efficiency of European banking systems: A correction by environment variables," Working Papers. Serie EC 1997-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasec:1997-12
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    File URL: http://www.ivie.es/downloads/docs/wpasec/wpasec-1997-12.pdf
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    Citations

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    Cited by:

    1. Mohamed Chaffai & Michel Dietsch & Ana Lozano-Vivas, 2001. "Technological and Environmental Differences in the European Banking Industries," Journal of Financial Services Research, Springer;Western Finance Association, vol. 19(2), pages 147-162, April.
    2. Jose Pastor & Lorenzo Serrano, 2005. "Efficiency, endogenous and exogenous credit risk in the banking systems of the Euro area," Applied Financial Economics, Taylor & Francis Journals, vol. 15(9), pages 631-649.
    3. Brissimis, Sophocles N. & Delis, Manthos D. & Tsionas, Efthymios G., 2010. "Technical and allocative efficiency in European banking," European Journal of Operational Research, Elsevier, vol. 204(1), pages 153-163, July.
    4. Jose Pastor, 2002. "Credit risk and efficiency in the European banking system: A three-stage analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 12(12), pages 895-911.
    5. Daniel Stavarek, 2005. "Efficiency of Banks in Regions at Different Stage of European Integration Process," Finance 0502020, University Library of Munich, Germany.
    6. Barbara Casu & Philip Molyneux, 2003. "A comparative study of efficiency in European banking," Applied Economics, Taylor & Francis Journals, vol. 35(17), pages 1865-1876.
    7. Jose Pastor, 1999. "Efficiency and risk management in Spanish banking: a method to decompose risk," Applied Financial Economics, Taylor & Francis Journals, vol. 9(4), pages 371-384.
    8. Daniel Stavarek, 2003. "Banking Efficiency in Visegrad Countries Before Joining the European Union," Finance 0312010, University Library of Munich, Germany.

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