Cost and profit efficiency in European banks

Abstract

IVIE working-papers offer in advance the results of economic research under way in order to encourage a discussion process before sending them to scientific journals for their final publication. ___________________ • The authors wish to thank David B. Humphrey for his comments and suggestions, and Juan Fernández de Guevara for his help in preparing information. The paper is part of project SEC98-0895 of the CICYT.

The impact of banking regulations on banks' cost and profit efficiency: Cross-country evidence

“…Thus, following Dietsch and Lozano-Vivas (2000), Maudos et al (2002), and others, we choose the following three outputs: loans (Q 1 ), other earning assets (Q2), and total deposits (i.e. customer and interbank) (Q3).…”

“…Furthermore, based on these arguments, Maudos et al (2002) and Kasman and Yildirim (2006) point out that in international comparisons across a diverse group of countries and competition levels it seems more appropriate to estimate an alternative rather than a standard profit function.…”

“…Profit efficiency is an even wider concept as it combines both costs and revenues in the measurement of efficiency. 3 Maudos et al (2002) point out that the estimation of profit efficiency and its comparison to cost efficiency, and international efficiency comparisons are two areas where the available evidence on bank efficiency is very limited. Thus, our study contributes in bridging this gap, while at the same time provides statistical evidence of the association of these two efficiency measures with capital requirements, official supervisory power, market discipline, and restriction on bank activities.…”

“…In other words, efficiency measures how close to the minimum cost or maximum profit a banks is, with the minimum and maximum being determined by the best performers in the sample. Maudos et al (2002) argue: "Computing profit efficiency, therefore, constitutes a more important source of information for bank management than the partial vision offered by analyzing cost efficiency" (p. 34). 4 The use of panel data over a cross-section provides more degrees of freedom in the estimation of the parameters.…”

Cost efficiency, economies of scale, technological progress and productivity in Indonesian banks

“…Using the same function as Carbo et al, (2002) they concluded that that Italian savings banks were between 85% and 87% efficient. Maudos et al (2002) made an effort to compare cost and profit efficiencies of banks from ten countries in Europe for the period 1993-1996. The countries include Austria, Belgium, Finland, France, Germany, Italy, Luxembourg, Portugal, Spain and the UK.…”