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Relationship Lending, Distance and Efficiency in a Heterogeneous Banking System

Author

Listed:
  • Cristina Bernini

    (Department and Faculty of Statistics, University of Bologna, Italy)

  • Paola Brighi

    (Department of Management, Faculty of Economics-Rimini, University of Bologna, Italy; The Rimini Centre for Economic Analysis (RCEA), Italy)

Abstract

During the last decades banks have progressively moved towards centralized and hierarchical organizational structures. Therefore, the investigation of the determinants of bank efficiency and relationships with the functional distance between the bank head-quarter and operational units have become increasingly important. This paper extends the literature on bank efficiency examining the impact of different bank business models on the efficiency of the Italian banks, distinguished by size and type over the period 2006-2009. Using a stochastic frontier approach, the intertemporal relationships between bank efficiency and some key variables, as distance and income diversification (used as proxies of different organizational banking models) are investigated. Results suggest that organizational structure significantly affects cost efficiency, being different between bank groups.

Suggested Citation

  • Cristina Bernini & Paola Brighi, 2011. "Relationship Lending, Distance and Efficiency in a Heterogeneous Banking System," Working Paper series 41_11, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:41_11
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    References listed on IDEAS

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    More about this item

    Keywords

    relationship lending; bank groups; credit risk; stochastic frontiers; panel data;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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