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Cost Efficiency Analysis in the Banking Industry: Empirical Case From Western Balkan

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  • Gazmend Nure

    (Freie Universität Berlin, Germany)

Abstract

The efficiency of commercial banks is essential for the stability of banks by implying that banks that take higher risks are more inefficient. This paper builds on a stochastic heteroscedastic boundary model, where one will analyze a sample of 70 banks in Western Balkan countries such as Albania, Northern Macedonia, Serbia, Kosovo, and Montenegro for the period 2007-2017, highlighting determinants of bank cost efficiency. Banks with less liquidity, with a lower solvency rate and a higher credit risk, are more ineffective than prudent credit institutions. The paper also aims to address the relative lack of studies on the efficiency of banks in the region through the use of the stochastic frontier analysis (SFA).

Suggested Citation

  • Gazmend Nure, 2020. "Cost Efficiency Analysis in the Banking Industry: Empirical Case From Western Balkan," International Journal of Corporate Finance and Accounting (IJCFA), IGI Global, vol. 7(2), pages 1-20, July.
    • Handle: RePEc:igg:jcfa00:v:7:y:2020:i:2:p:1-20
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