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This paper explores the issue of efficiency in European banking. It tries to distinguish among the market-structure and efficient-structure hypotheses by incorporating into our empirical analysis measures of X-efficiency and scale-efficiency. Tests of the four hypotheses (the two market power hypotheses and the two efficient structure hypotheses) were performed by regressing measures of concentration, market share, X-efficiency and scale efficiency against profits. Our empirical findings seem to suggest that the two efficient structure variables do not help in the explanation of the variability of bank profits and, hence, these results do not provide any support for the two efficient structure hypotheses. Our findings also indicate that big banks are more X-efficient than small banks. This result seems to suggest that there are cost advantages associated with greater bank size.

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Exchange-traded funds (ETFs) have grown considerably since their first introduction two and a half decades ago, becoming one of the most popular passive investment vehicles among retail and professional investors. However, their tracking ability is often questioned. In this paper we estimate tracking errors from a sample of 15 American and European ETFs utilizing three different methods. We find that American ETFs seem to exhibit lower tracking errors than European ETFs in all measurements of tracking error. We also analyse and discuss the factors that influence tracking error. Fund size and expense ratios are found to be affecting the tracking ability of ETFs. The results of this study concerning the performance and tracking error determinants of ETFs are consistent with the evidence presented in the literature. To our knowledge, this is the first study to compare American and European ETFs in terms of their tracking ability and their tracking error determinants.

In this paper, we investigate the relationship among capital, risk and efficiency in Eurozone and the U.S. banking institutions. We also assess the determinants of bank capital, risk and efficiency providing evidence of how the interrelationship and the managerial behaviors vary per type of bank (retail, commercial and investment banks). Concerning the methodology, we employ the input-oriented CCR model of data envelopment analysis developed by Charnes, Cooper, and Rhodes (1978) to estimate efficiency. We also apply the Z-score to calculate bank risk and the ratio of the value of total equity to total assets as an indicator of bank capital. Moreover, the relationship among capital, risk and efficiency of banking institutions is investigated by employing the three-stage least squares (3SLS) model, developed by Zellner and Theil (1962). Our main findings indicate that risk and capital are positively linked in the U.S. and Eurozone banks. The findings also suggest that efficiency has a negative and significant effect on bank risk in the majority of the banks of our sample. Additionally, we may conclude that the impact of risk and capital on efficiency levels is sensitive to the type of bank. As regards the effect of the variable efficiency on capital, the results are negative for all the banks in our sample.