Estimating the efficiency of Greek banking system during the last decade of world economic crisis

Abstract

Purpose The purpose of this paper is to examine the efficiency of the four largest Greek banking organizations for the period 2004–2014, including both a period of strong economic growth and a period of economic crisis and recession, which is still plaguing the Greek economy and more specifically the Greek banking sector. Design/methodology/approach The study incorporates the application of financial ratio analysis and the data envelopment analysis (DEA) in order to calculate the technical efficiency of Greek financial institutions. More specifically, a two-stage output-oriented DEA model is developed in order to estimate the global efficiency of banks. The banking function is considered as consisting of two stages in series, a service/operational efficiency and a profitability efficiency. In both output-oriented models, methods of constant returns to scale and variable returns to scale were applied. Findings The results show that in terms of operational efficiency, banks started from a low rate of return in 2004, which improved until 2008, which marked the peak of operational efficiency. By 2010, the operating efficiency varied with downward trend until 2012–2013. In terms of profitability efficiency, the image is clearer, since the impact the financial crisis had on bank’s profit efficiency led, by 2012, to a plunge in the average efficiency by 30–40 percent. Originality/value A multi-stage DEA process, input oriented, was used in order to estimate changes in the performance and efficiency of banking system. The period 2004–2014 has not been examined until recently and all previous studies used the output-oriented DEA model.

Financial and Macroeconomic Drivers of Bank Profitability

“…Various researchers have examined the volatility of bank's financial indicators during the Greekcrisis.RegardingthefactorsthatinfluencedtheprofitabilityofGreekbanksduringthecrisis, Schiniotakis(2012)showedthatahighROAratioisassociatedwithwell-capitalisedbankswith sufficientliquidity.Itisalsoobservedthatcooperativebankswereinitiallylessaffectedbythecrisis than commercial banks. The research by Sompolos and Mavri (2018) reveals that the operating efficiencyofGreekbanksreacheditspeakin2008anduntil2013ithadadownwardtrend.The financialcrisisledtoa30%to40%declineintheirprofitabilityduringthesameperiod.…”

A Conceptual Framework of The Impact of Arabic Spring on Efficiency, Intellectual Capital, and Corporate Governance of Islamic Banks

“…Researchers have used different approaches to measure banking efficiency. (Milhem & Istaiteyeh, 2015) measured efficiency using the traditional method, while (Sompolos & Mavri, 2018) measured efficiency using financial ratio analysis. (Tuškan & Stojanović, 2016) and (Berger & Humphrey, 1997b) categorized the parametric methods into three different groups, namely SFA, DFA, and TFA.…”