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- Cost And Profit Efficiency In European Banks

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Author Info
Francisco Pérez García () (Instituto Valenciano de Investigaciones Económicas)
Javier Quesada Ibañez () (Instituto Valenciano de Investigaciones Económicas)
Joaquín Maudos Villarroya (Instituto Valenciano de Investigaciones Económicas)
José Manuel Pastor Monsálvez (Universitat de València)

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Abstract

The analysis of bank accounting ratios as indicators of competitiveness has been complemented and occasionally revised by the increasing use of more sophisticated indices ofefficiency. In recent years, over a hundred studies have analysed the efficiency of financial institutions, concentrating mostly on costs. However, the few available studies that estimate profitfrontier functions come up with efficiency levels that are much lower than cost efficiency levels, implying the existence of the most important inefficiencies on the revenue side. Also, few are thestudies that run comparisons at an international level, and none of these deals with profit efficiency. This paper analyses, by means of alternative techniques, both cost and profit efficiency in a sample of 11 countries of the European Union for the period 1993-1996, again obtaining profit efficiency levels lower than cost efficiency levels, as well as compatible results in the different estimation procedures used. El análisis de ratios contables como indicadores de competitividad ha sido completado y ocasionalmente revisado por la creciente utilización de indicadores más sofisticados de eficiencia. En los últimos años, más de un centenar de trabajos han analizado la eficiencia de las instituciones financieras, centrándose mayoritariamente en la vertiente de los costes. Sin embargo, los escasos estudios que estiman funciones frontera de beneficios obtienen niveles de eficiencia en beneficios mucho menores que en costes, lo que implica la existencia de importantes ineficiencias en la vertiente de los ingresos. Además, son pocos los estudios que realizan comparaciones a nivel internacional, y ninguno de ellos analiza la eficiencia en beneficios. Por ese motivo, este trabajo analiza la eficiencia en costes y beneficios en una muestra de 11 países de la Unión Europea en el periodo 1993-93 por medio de diversas técnicas frontera. Se obtienen niveles de eficiencia en beneficios inferiores que en costes, siendo este resultado robusto a las distintas técnicas utilizadas.

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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 1999-12.

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Length: 29 pages
Date of creation: Sep 1999
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasec:1999-12

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Related research
Keywords: Eficiencia; banca europea Efficiency; European Banks;

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Pastor, JoseManuel & Perez, Francisco & Quesada, Javier, 1997. "Efficiency analysis in banking firms: An international comparison," European Journal of Operational Research, Elsevier, vol. 98(2), pages 395-407, April. [Downloadable!] (restricted)
    Other versions:
  2. Miller, Stephen M. & Noulas, Athanasios G., 1996. "The technical efficiency of large bank production," Journal of Banking & Finance, Elsevier, vol. 20(3), pages 495-509, April. [Downloadable!] (restricted)
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    Other versions:
  5. Allen, Linda & Rai, Anoop, 1996. "Operational efficiency in banking: An international comparison," Journal of Banking & Finance, Elsevier, vol. 20(4), pages 655-672, May. [Downloadable!] (restricted)
  6. Berger, Allen N. & Hancock, Diana & Humphrey, David B., 1993. "Bank efficiency derived from the profit function," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 317-347, April. [Downloadable!] (restricted)
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  8. Allen N. Berger & Loretta J. Mester, 1997. "Inside the black box: what explains differences in the efficiencies of financial institutions?," Working Papers 97-1, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  9. Humphrey, David B & Pulley, Lawrence B, 1997. "Banks' Responses to Deregulation: Profits, Technology, and Efficiency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 73-93, February.
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  11. Rogers, Kevin E., 1998. "Nontraditional activities and the efficiency of US commercial banks," Journal of Banking & Finance, Elsevier, vol. 22(4), pages 467-482, May. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sophocles N. Brissimis & Matthaios D. Delis & Efthymios G. Tsionas, 2006. "Technical and Allocative Efficiency in European Banking," Working Papers 46, Bank of Greece. [Downloadable!]
  2. Bos, J.W.B. & Koetter, M., 2006. "Handling losses in translog profit models," MPRA Paper 1433, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  3. Adnan Kasman & Saadet Kirbas Kasman & Oscar Carvallo, 2005. "Efficiency and Foreign Ownership in Banking: An International Comparison," Discussion Paper Series 05/03, Dokuz Eylül University, Faculty of Business, Department of Economics, revised 23 Nov 2005. [Downloadable!]
  4. Marques Ibanez, David & Molyneux, Philip, 2002. "Integration of European Banking and Financial Markets," EIFC - Technology and Finance Working Papers 14, United Nations University, Institute for New Technologies. [Downloadable!]
    Other versions:
  5. Jacob Bikker & Jaap Bos, 2004. "Trends in Competition and Profitability in the Banking Industry: A Basic Framework," DNB Working Papers 018, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  6. Koetter, Michael, 2006. "The stability of efficiency rankings when risk-preferences and objectives are different," Discussion Paper Series 2: Banking and Financial Studies 2006,08, Deutsche Bundesbank, Research Centre. [Downloadable!]
  7. Barbara Casu & Claudia Girardone, 2004. "Financial conglomeration: efficiency, productivity and strategic drive," Applied Financial Economics, Taylor and Francis Journals, vol. 14(10), pages 687-696, June. [Downloadable!] (restricted)
  8. Laurent Weill, 2008. "Convergence in Banking Efficiency Across European Countries," Working Papers of LaRGE (Laboratoire de Recherche en Gestion et Economie) 2008-07, Laboratoire de Recherche en Gestion et Economie, Université de Strasbourg (France). [Downloadable!]
  9. Delis, Manthos D & Papanikolaou, Nikolaos I, 2009. "Determinants of bank efficiency: Evidence from a semi-parametric methodology," MPRA Paper 13893, University Library of Munich, Germany. [Downloadable!]
  10. Fitzpatrick, Trevor & McQuinn, Kieran, 2005. "Measuring Bank Profit Efficiency," Research Technical Papers 3/RT/05, Central Bank & Financial Services Authority of Ireland (CBFSAI). [Downloadable!]
    Other versions:
  11. José Manuel Pastor Monsálvez & Lorenzo Serrano Martínez, 2000. "Efficiency, Endogenous And Exogenous Credit Risk In The Banking Systems Of The Euro Area," Working Papers. Serie EC 2000-17, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
    Other versions:
  12. Santiago Carbó-Valverde, 2007. "Implications of Basel II for Different Bank Ownership Patterns in Europe," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(4), pages 391-397, December. [Downloadable!] (restricted)
  13. José Pastor & Lorenzo Serrano, 2006. "The Effect of Specialisation on Banks' Efficiency: An International Comparison," International Review of Applied Economics, Taylor and Francis Journals, vol. 20(1), pages 125-149, January. [Downloadable!] (restricted)
  14. Nicos C. Kamberoglou & Elias Liapis & George T. Simigiannis & Panagiota Tzamourani, 2004. "Cost Efficiency in Greek Banking," Working Papers 09, Bank of Greece. [Downloadable!]
  15. Fotios Pasiouras, 2008. "International evidence on the impact of regulations and supervision on banks’ technical efficiency: an application of two-stage data envelopment analysis," Review of Quantitative Finance and Accounting, Springer, vol. 30(2), pages 187-223, February. [Downloadable!] (restricted)
  16. Bos, Jaap W. B. & Heid, Frank & Koetter, Michael & Kolari, James W. & Kool, Clemens J. M., 2005. "Inefficient or just different? Effects of heterogeneity on bank efficiency scores," Discussion Paper Series 2: Banking and Financial Studies 2005,15, Deutsche Bundesbank, Research Centre. [Downloadable!]
  17. Adnan Kasman & Saadet Kirbas-Kasman, 2006. "Technical Change in Banking: Evidence From Transition Countries," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 13(1), pages 129-144, February. [Downloadable!] (restricted)
  18. Jean-Paul Abraham & Peter van Dijcke, 2002. "European Financial Cross-Border Consolidation: At the crossroads in Europe? By exception, evolution or revolution?," SUERF Studies, SUERF - The European Money and Finance Forum, number 22 edited by Morten Balling, October. [Downloadable!]
  19. Koetter, Michael & Poghosyan, Tigran, 2008. "The implications of latent technology regimes for competition and efficiency in banking," Discussion Paper Series 2: Banking and Financial Studies 2008,15, Deutsche Bundesbank, Research Centre. [Downloadable!]
  20. Delis, Manthos D & Koutsomanoli-Filippaki, Anastasia & Staikouras, Christos & Gerogiannaki, Katerina, 2008. "Evaluating cost and profit efficiency: a comparison of parametric and nonparametric methodologies," MPRA Paper 14039, University Library of Munich, Germany. [Downloadable!]
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  21. Catarina Figueira & Joseph G. Nellis & David Parker, 2007. "Challenges Facing the Polish Banking Industry: A Comparative Study with UK Banks," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 5(1), pages 25-44. [Downloadable!]
  22. Michael Koetter, 2006. "Measurement Matters—Alternative Input Price Proxies for Bank Efficiency Analyses," Journal of Financial Services Research, Springer, vol. 30(2), pages 199-227, October. [Downloadable!] (restricted)
  23. Santiago Carbó Valverde & David Humphrey & Rafael López del Paso, 2007. "Opening the black box: Finding the source of cost inefficiency," Journal of Productivity Analysis, Springer, vol. 27(3), pages 209-220, June. [Downloadable!] (restricted)
  24. Michael Koetter, 2004. "The Stability of Efficiency Rankings when Risk-Preferences are different," Working Papers 04-08, Utrecht School of Economics. [Downloadable!]
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