Evaluating European Bank Efficiency Using Data Envelopment Analysis: Evidence in the Aftermath of the Recent Financial C
- PDF / 309,184 Bytes
- 15 Pages / 439.37 x 666.142 pts Page_size
- 15 Downloads / 193 Views
Evaluating European Bank Efficiency Using Data Envelopment Analysis: Evidence in the Aftermath of the Recent Financial Crisis Cândida Ferreira 1
# International Atlantic Economic Society 2020
Abstract This paper seeks to contribute to the analysis of bank efficiency in the European Union during the aftermath of the international financial crisis that began in 2007, using data envelopment analysis and a sample of 485 banks from all European Union member-states between 2011 and 2017. The results confirm the existence of bank inefficiency, mostly due to inefficient managerial performance and bad combinations of bank inputs and outputs. The existence of bank inefficiency is particularly relevant during this period as European Union countries faced not only financial imbalances but also imbalances in their public budgets. Some were even obliged to request international financial assistance to overcome the deep financial and sovereign crises. Additionally, there was evidence of appropriate scale production and dynamic technological changes during the interval. Moreover, the panel estimates explaining bank total factor productivity changes suggest the choices of banks in terms of fixed assets, profit-before-taxes-to-average-assets ratio and off-balance-sheet-items-to-totalassets ratio contributed positively to productivity changes. The impaired-loans-toequity ratio and bank interest margins were not in line with the total factor productivity changes of the European Union banking sector. Keywords European Union banking sector . Bank efficiency . Data envelopment analysis . Malmquist index JEL Classification C33 . D24 . F36 . G21 Electronic supplementary material The online version of this article (https://doi.org/10.1007/s11294-02009807-y) contains supplementary material, which is available to authorized users.
* Cândida Ferreira [email protected]
1
ISEG, UL – Lisbon School of Economics and Management of the Universidade de Lisboa UECE, and REM, Research Unit in Complexity and Economics, REM – Research in Economics and Mathematics, Lisbon, Portugal
Ferreira C.
Introduction This paper contributes to the analysis of bank efficiency and the explanation of productivity changes in the European Union (EU) in the aftermath of the recent international financial crisis, using data envelopment analysis (DEA) and a sample of banks from all EU member-states between 2011 and 2017. Overall, banks should collect savings and allocate resources efficiently, playing a crucial social-economic role. Banks are also supposed to manage risks and help solve potential adverse selection and moral hazard problems caused by imperfect information between borrowers and lenders. Recently, banking institutions have been exposed to several challenges, such as increased liberalisation, deregulation, technological changes and internationalisation. Under these conditions, banks have strong incentives to maximise high-valued investment opportunities. Sometimes they do not prevent risks and contribute to financial distress and insolvencies that
Data Loading...
