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Cost and profit efficiency of french commercial banks

  • Béjaoui Rouissi, Raoudha
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    The purpose is to investigate the efficiency levels of commercial domestic versus foreign banks in France by comparing the use of basic accounting ratios and the stochastic cost and profit frontier analysis (SFA). We analyze the profit and cost efficiency of domestic and foreign banks operating in France using unbalanced sample, including 62 domestic and 40 foreign banks over the period 2000-2007. We show that foreign banks exhibit higher cost and profit efficiency than domestic banks. This finding goes against previous empirical literature, concluding on advantage of cost efficiency for domestic banks in developed countries such as France (Berger et al. (2000)). However, the comparison between the cost efficiency and the profit efficiency scores, suggests that foreign banks are better managed in terms of profit efficiency mainly due to higher cost efficiency. On the other side, profit efficiency of domestic banks, was due to higher revenue efficiency. This suggests that French domestic banks operate with excessive margins.

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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34245.

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    Date of creation: 27 Oct 2011
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    Handle: RePEc:pra:mprapa:34245
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    14. Havrylchyk, Olena, 2006. "Efficiency of the Polish banking industry: Foreign versus domestic banks," Journal of Banking & Finance, Elsevier, vol. 30(7), pages 1975-1996, July.
    15. Michel Dietsch & Mohamed E. Chaffai & Jean-Claude Berthlemy, 1999. "Mesures de l'efficience technique et de l'efficience allocative par les fonctions de distance et application aux banques européennes," Revue Économique, Programme National Persée, vol. 50(3), pages 633-644.
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