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The impact of Brexit on bank efficiency: Evidence from UK and Ireland

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  • Fernández, Xosé Luís
  • Paz-Saavedra, David
  • Coto-Millán, Pablo

Abstract

The withdrawal of the United Kingdom (UK) from the European Union (EU) opens an unprecedented scenario for the UK and EU economy. One of the sensitive points concerns the banking sector. This paper considers the impact of the Brexit referendum on the bank efficiency. Using stochastic frontier analysis (SFA) methods, an input-oriented distance function was estimated for 56 British and Ireland leading banks over the 2007 to 2016 period. Results suggest that the uncertainty created by the 2016 referendum has negatively influenced the banking sector. The loss of efficiency is estimated in 5.6% for UK banks and 3.7% for Ireland banks.

Suggested Citation

  • Fernández, Xosé Luís & Paz-Saavedra, David & Coto-Millán, Pablo, 2020. "The impact of Brexit on bank efficiency: Evidence from UK and Ireland," Finance Research Letters, Elsevier, vol. 36(C).
    • Handle: RePEc:eee:finlet:v:36:y:2020:i:c:s1544612319303691
    DOI: 10.1016/j.frl.2019.101338
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    2. Vu, Phuong Thi Thu & Huynh, Nhan & Phan, Hoa & Hoang, Hanh, 2023. "Financial earthquakes and aftershocks: From Brexit to Russia-Ukraine conflict and the stability of European banks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).

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    Keywords

    Brexit; Bank efficiency; SFA; UK; Ireland;
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