Financial crisis and bank efficiency: An empirical study of European banks

Abstract

This article uses the frontier technique to highlight the differences in the impact of the global financial crisis on the efficiency of 783 commercial banks from the EU during the period 2004-2010. We emphasise the distinctions between large and small banks, publicly traded and privately held banks, as well as the statuses of banks' country of origin, especially for the year in which they joined the EU and held eurozone membership. Our results show that the crisis has a significant and positive impact on both the cost and profit inefficiencies of the commercial banks from the EU, and that this impact is higher on eurozone banks. In terms of cost efficiency, the most affected by the crisis are the large publicly traded banks, operating in old members of the EU. With regard to the profit inefficiency, the global financial crisis seems to have had a lower impact on the large public banks.

Are Larger Banks More Efficient in the Central Eastern European Countries?

“…(1) Fixed Assets (X1), (2) Labor (X2), and 3 Following the study of Berger and Mester (1997) and Andries and Ursu (2016), the ratio of Equity to Total Assets (Eq_TA) is included as an input to control for differences across banks' risk preferences. To introduce linear homogeneity restrictions, the dependent variable and all three input prices are normalized by the Cost of Funds -W3.…”

“…The research on the relationship between the bank's size and its performance in the CEE countries is rather limited. Among them Andries and Ursu (2016), based on the research on banks operating in seven CEE countries over the period of 2004-2008, find that banks' efficiency characterises in an upward trend and is positively affected by the level of banking sector concentration and the size of banks. Efthyvoulou and Pobrane z czasopisma Annales H -Oeconomia http://oeconomia.annales.umcs.pl Data: 03/11/2020 06:44:39 U M C S Yildirim (2014), based on the performance of banks in seventeen CEE countries over the period 2002-2010, assess their market power and efficiency.…”

Bank Efficiency and Concentration of the Banking Sector in the Cee Countries

“…We assume that banks have two outputs: Loans (Q1) and Other Financial Assets (estimated as Financial Assets -Net Total Loans) (Q2). The inputs are: (1) Fixed Assets (X1), (2) Labour (X2), and 3 27 we included also Equity to Total Assets (Eq_TA) as an input to control for differences across banks' risk preferences. To impose linear homogeneity restrictions, we normalised the dependent variable and all input prices by W3.…”

“…To impose linear homogeneity restrictions, we normalised the dependent variable and all input prices by W3. Finally, we employed time dummy (T) to allow for technological and other time-specific changes, following Lensink, Meesters, and Naaborg 28 , Lozano-Vivas and Pasiouras 29 , and Andries and Ursu 30 . Based on estimating equation 1we obtained the values of bank profit inefficiency effects .…”

The Global Economic Crisis and Its Impact on Bank Lending in Indonesia

“…The global financial crisis did not only affect economic growth but also affected banking industry. The global financial crisis has impacted bank performance such as bank profitability (Notta & Vlachvei, 2014;Yudaruddin, 2017a), bank efficiency (Andrie' & Ursu, 2016), bank stability (Cernohorska, 2015), and bank lending (Pontines & Siregar, 2012;Silalahi, Wibowo, & Nurlian, 2012;Allen, Jackowicz, & Kowalewski, 2013;Cull & Pería, 2013;De Haas & Van Lelyveld, 2014;Yudaruddin, 2017b).…”