IDEAS home Printed from https://ideas.repec.org/p/sef/csefwp/290.html
   My bibliography  Save this paper

Risk and Regulation: The Efficiency of Italian Cooperative Banks

Author

Listed:

Abstract

In this paper we analyse the determination of cost efficiency in a sample of Italian small banks located in different geographical areas and including two great institutional categories: cooperative banks (CB’s) and other banks. We highlight the effect of environmental factors (asset quality, local GDP per capita) on banks’ performance, and provide novel evidence in favour of the “bad luck” hypothesis suggested by Berger and De Young (Journal of Banking and Finance, 1997). Local GDP per capita strongly affects the territorial differentials for technical efficiency, especially for CB’s. This can be easily rationalised, as current regulations hamper CB’s vis-à-vis other banks in their capability to diversify territorially. Our estimates provide us with a tentative quantitative measure of the costs of missing diversification, ranging between 2 and 7 percentage points. Correspondingly, our evidence suggests that there is potentially strong endogeneity in some currently available bank performance indicators.

Suggested Citation

  • Cristian Barra & Sergio Destefanis & Giuseppe Lubrano Lavadera, 2011. "Risk and Regulation: The Efficiency of Italian Cooperative Banks," CSEF Working Papers 290, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:290
    as

    Download full text from publisher

    File URL: http://www.csef.it/WP/wp290.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Karin Mayr, 2007. "Immigration and income redistribution: A political economy analysis," Public Choice, Springer, vol. 131(1), pages 101-116, April.
    2. Stark, Oded & Helmenstein, Christian & Prskawetz, Alexia, 1997. "A brain gain with a brain drain," Economics Letters, Elsevier, vol. 55(2), pages 227-234, August.
    3. Gordon H. Hanson & Antonio Spilimbergo, 2001. "Political economy, sectoral shocks, and border enforcement," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 612-638, August.
    4. Kjetil Storesletten, 2000. "Sustaining Fiscal Policy through Immigration," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 300-323, April.
    5. Anna Maria Mayda, 2006. "Who Is Against Immigration? A Cross-Country Investigation of Individual Attitudes toward Immigrants," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 510-530, August.
    6. Abdurrahman Aydemir & George J. Borjas, 2007. "Cross-Country Variation in the Impact of International Migration: Canada, Mexico, and the United States," Journal of the European Economic Association, MIT Press, vol. 5(4), pages 663-708, June.
    7. J. Amegashie, 2004. "A political economy model of immigration quotas," Economics of Governance, Springer, vol. 5(3), pages 255-267, November.
    8. Dustmann Christian & Preston Ian P, 2007. "Racial and Economic Factors in Attitudes to Immigration," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-41, November.
    9. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    10. Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, vol. 76(1), pages 56-71, March.
    11. Sanoussi Bilal & Jean-Marie Grether & Jaime de Melo, 2015. "Attitudes Towards Immigration: A Trade Theoretic Approach," World Scientific Book Chapters,in: Developing Countries in the World Economy, chapter 18, pages 439-453 World Scientific Publishing Co. Pte. Ltd..
    12. Ortega, Francesc, 2005. "Immigration quotas and skill upgrading," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1841-1863, September.
    13. Nannestad, Peter, 2007. "Immigration and welfare states: A survey of 15 years of research," European Journal of Political Economy, Elsevier, vol. 23(2), pages 512-532, June.
    14. Fernando Ramos, 1992. "Out-Migration and Return Migration of Puerto Ricans," NBER Chapters,in: Immigration and the Workforce: Economic Consequences for the United States and Source Areas, pages 49-66 National Bureau of Economic Research, Inc.
    15. Cagetti, Marco & De Nardi, Mariacristina, 2008. "Wealth Inequality: Data And Models," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 285-313, September.
    16. Gabriella Bucci & Rafael Tenorio, 1996. "On financing the internal enforcement of illegal immigration policies," Journal of Population Economics, Springer;European Society for Population Economics, vol. 9(1), pages 65-81, February.
    17. Assaf Razin & Efraim Sadka, 2004. "Welfare Migration: Is the Net Fiscal Burden a Good Measure of its Economic Impact on the Welfare of the Native-Born Population?," CESifo Economic Studies, CESifo, vol. 50(4), pages 709-716.
    18. Gordon H. Hanson & Kenneth Scheve & Matthew J. Slaughter, 2007. "Public Finance And Individual Preferences Over Globalization Strategies," Economics and Politics, Wiley Blackwell, vol. 19(1), pages 1-33, March.
    19. Gil Epstein & Avi Weiss, 2011. "The why, when, and how of immigration amnesties," Journal of Population Economics, Springer;European Society for Population Economics, pages 285-316.
    20. Stefano Bosi & Eleni Iliopulos & Francesco Magris, 2006. "Skills, Immigration and Selective Policies," Documents de recherche 06-03, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    21. Kenneth F. Scheve & Matthew J. Slaughter, 2001. "Labor Market Competition And Individual Preferences Over Immigration Policy," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 133-145, February.
    22. Francesco MAGRIS & Giuseppe RUSSO, 2005. "Voting on Mass Immigration Restriction," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 113(1), pages 67-92.
    23. Jean-Marie Grether & Jaime de Melo & Tobias Müller, 2015. "The Political Economy of International Migration in a Ricardo–Viner Model," World Scientific Book Chapters,in: Developing Countries in the World Economy, chapter 17, pages 411-437 World Scientific Publishing Co. Pte. Ltd..
    24. Marcel Thum, 2004. "Controlling Migration in an Open Labor Market," Public Choice, Springer, vol. 119(3_4), pages 425-443, June.
    25. Tito Boeri & Herbert Brücker, 2005. "Why are Europeans so tough on migrants?," Economic Policy, CEPR;CES;MSH, vol. 20(44), pages 629-703, October.
    26. O'Rourke, Kevin H. & Sinnott, Richard, 2006. "The determinants of individual attitudes towards immigration," European Journal of Political Economy, Elsevier, vol. 22(4), pages 838-861, December.
    27. Benhabib, Jess, 1996. "On the political economy of immigration," European Economic Review, Elsevier, vol. 40(9), pages 1737-1743, December.
    28. Holger Bonin & Bernd Raffelhüschen & Jan Walliser, 2000. "Can Immigration Alleviate the Demographic Burden?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(1), pages 1-1, September.
    29. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
    30. Magris, Francesco & Russo, Giuseppe, 2009. "Selective immigration policies, human capital accumulation and migration duration in infinite horizon," Research in Economics, Elsevier, pages 114-126.
    31. Gil Epstein & Shmuel Nitzan, 2006. "The struggle over migration policy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(4), pages 703-723, October.
    32. Steedman, Hilary & McIntosh, Steven, 2001. "Measuring Low Skills in Europe: How Useful Is the ISCED Framework?," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 564-581, July.
    33. Facchini, Giovanni & Willmann, Gerald, 2005. "The political economy of international factor mobility," Journal of International Economics, Elsevier, vol. 67(1), pages 201-219, September.
    34. Sara Lemos & Jonathan Portes, 2008. "New Labour? The Impact of Migration from Central and Eastern European Countries on the UK Labour Market," Discussion Papers in Economics 08/29, Department of Economics, University of Leicester.
    35. Borjas, G.J., 1999. "Economic Research on the Determinants of Immigration. Lesons for the European Union," Papers 438, World Bank - Technical Papers.
    36. James B. Davies & Susanna Sandström & Anthony Shorrocks & Edward N. Wolff, 2011. "The Level and Distribution of Global Household Wealth," Economic Journal, Royal Economic Society, vol. 121(551), pages 223-254, March.
    37. Hansen, Jorgen Drud, 2003. "Immigration and income redistribution in welfare states," European Journal of Political Economy, Elsevier, vol. 19(4), pages 735-746, November.
    38. Schiff, Maurice, 2002. "Love thy neighbor: trade, migration, and social capital," European Journal of Political Economy, Elsevier, vol. 18(1), pages 87-107, March.
    39. Hillman, Arye L. & Weiss, Avi, 1999. "A theory of permissible illegal immigration," European Journal of Political Economy, Elsevier, vol. 15(4), pages 585-604, November.
    40. Mazza, Isidoro & van Winden, Frans, 1996. "A Political Economic Analysis of Labor Migration and Income Redistribution," Public Choice, Springer, vol. 88(3-4), pages 333-363, September.
    41. Hainmueller, Jens & Hiscox, Michael J., 2007. "Educated Preferences: Explaining Attitudes Toward Immigration in Europe," International Organization, Cambridge University Press, vol. 61(02), pages 399-442, April.
    42. George J. Borjas & Richard B. Freeman, 1992. "Immigration and the Workforce: Economic Consequences for the United States and Source Areas," NBER Books, National Bureau of Economic Research, Inc, number borj92-1, January.
    43. Miguet, Florence, 2008. "Voting about immigration policy: What does the Swiss experience tell us?," European Journal of Political Economy, Elsevier, vol. 24(3), pages 628-641, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Rachele Anna Ambrosio & Paolo Coccorese, 2015. "Bad Loans and De Novo Banks: Evidence From Italy," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 44(1), pages 101-122, February.
    2. Aiello, Francesco & Bonanno, Graziella, 2014. "On the Sources of Heterogeneity in Banking Efficiency Literature," MPRA Paper 58591, University Library of Munich, Germany.
    3. Francesco Aiello & Graziella Bonanno, 2016. "Efficiency in banking: a meta-regression analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 112-149, January.
    4. Bonanno, Graziella, 2012. "L’efficienza del sistema bancario italiano dal 2006 al 2010. Un’applicazione delle frontiere stocastiche
      [The Efficiency of Italian Banking System over 2006-2010. An Application of the Stochastic F
      ," MPRA Paper 42831, University Library of Munich, Germany.
    5. Francesco Aiello & Graziella Bonanno, 2016. "Looking at the determinants of efficiency in banking: evidence from Italian mutual-cooperatives," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(4), pages 507-526, July.
    6. Aiello, Francesco & Bonanno, Graziella, 2015. "Multilevel empirics for small banks in local markets," MPRA Paper 64399, University Library of Munich, Germany.
    7. Annamaria Nese & Roberta Troisi, 2014. "Individual Preferences and Job Characteristics: An Analysis of Cooperative Credit Banks," LABOUR, CEIS, vol. 28(2), pages 233-249, June.
    8. Francesco Aiello & Graziella Bonanno, 2013. "Profit and cost efficiency in the Italian banking industry (2006-2011)," Economics and Business Letters, Oviedo University Press, vol. 2(4), pages 190-205.
    9. Nadège Jassaud, 2014. "Reforming the Corporate Governance of Italian Banks," IMF Working Papers 14/181, International Monetary Fund.
    10. Annamaria Nese & Roberta Troisi, 2012. "Cooperative credit banks: some fundamental institutional features," Working Papers 3_223, Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno.
    11. Aiello, Francesco & Bonanno, Graziella, 2016. "Bank efficiency and local market conditions. Evidence from Italy," Journal of Economics and Business, Elsevier, vol. 83(C), pages 70-90.
    12. Bonanno Graziella, 2014. "The Efficiency of the Italian Banking System over 2006-2011. An Application of the Stochastic Frontier Approach," Rivista italiana degli economisti, Società editrice il Mulino, issue 2, pages 277-306.

    More about this item

    Keywords

    Cooperative banks; Cost efficiency; Local shocks; Territorial diversification;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L89 - Industrial Organization - - Industry Studies: Services - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    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:sef:csefwp:290. 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: (Lia Ambrosio). General contact details of provider: http://edirc.repec.org/data/cssalit.html .

    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.