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Management quality and risk preference as determinants of efficiency in the italian banking system

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  • Luca Giordano
  • Antonio Lopes

Abstract

Management Quality and Risk Preference as Determinants of Efficiency in the Italian Banking System (by Luca Giordano, Antonio Lopes) - ABSTRACT: Italian banks are characterized by deep efficiency inequality across size, location, Cooperative Credit Banks, and Limited Companies. Moreover, non-performing loans are higher in the South than elsewhere. In view of these evidences we asked: is the efficiency gap of the southern banks (and therefore their lower screening and monitoring ability) the primary source of their higher level of bad loans? Or is the poorer quality of the southern bank loans (due to the adverse macroeconomic environment) that causes lower efficiency? As a second point to investigate, we recognize that banks have different risk aversion, which affects the choice of input vector, and we expressly take into account the capitalization degree (as a buffer against the risk) in estimating the bank cost and profit stochastic frontier. The results of the analysis, based on the stochastic frontier models, provide evidence in favour of the endogeneity theory of non-performing loans. Keywords: Bank Efficiency, Stochastic Frontiers, Italian Banks

Suggested Citation

  • Luca Giordano & Antonio Lopes, 2007. "Management quality and risk preference as determinants of efficiency in the italian banking system," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2007(91), pages 55-73.
    • Handle: RePEc:fan:steste:v:html10.3280/ste2007-091003
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    Cited by:

    1. Cristian Barra & Giovanna Bimonte & Roberto Zotti, 2016. "On the relationship among efficiency, capitalization and risk: does management matter in local banking market?," Applied Economics, Taylor & Francis Journals, vol. 48(41), pages 3912-3934, September.
    2. Cristian Barra & Nazzareno Ruggiero, 2022. "Firm innovation and local bank efficiency in Italy: Does the type of bank matter?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(4), pages 1083-1128, December.

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