We employ the stochastic frontier approach and estimate a common frontier in order to examine cost and profit efficiency in the banking systems of the ten new European Union member states over the period 1998-2003. The results indicate a generally low level of cost and an even lower level of profit efficiency, whilst we do not observe marked differences of inefficiency scores across countries. Foreign banks outperform both state-owned and domestic private-owned banks in terms of profit efficiency, though results are less clear in the case of cost efficiency. In addition, [beta]- and [sigma]-convergence criteria indicate some convergence in cost efficiency across the new member states, yet no convergence appears to have been achieved in terms of profit efficiency.
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Volume (Year): 17 (2008) Issue (Month): 5 (December) Pages: 1156-1172 Download reference. The following formats are available: HTML
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