Regional bank efficiency and its effect on regional growth in “normal” and “bad” times

Abstract

Provided in Cooperation with: RWI -Leibniz-Institut für Wirtschaftsforschung, EssenSuggested Citation: Belke, Ansgar; Haskamp, Ulrich; Setzer, Ralph (2015) : Regional bank efficiency and its effect on regional growth in 'normal ' and 'bad' times, Ruhr Economic Papers, No. 586, The working papers published in the Series constitute work in progress circulated to stimulate discussion and critical comments. Views expressed represent exclusively the authors' own opinions and do not necessarily refl ect those of the editors. Ruhr Economic Papers #586Ansgar Belke, Ulrich Haskamp, and Ralph Setzer Regional Bank Effi ciency and its Eff ect on Regional Growth in "Normal" and "Bad" Times

The Social Efficiency for Sustainability: European Cooperative Banking Analysis

“…However, there are cultural and environmental aspects, or technical aspects (regulation, taxes or policies) that could affect the social values of each type of financial institution. Previous studies by Lozano-Vivas et al [24] and Belke et al [14] include country-effect as a determinant for bank efficiency, and we will continue their research with more evidence to show the harmonization level of European banking.…”

“…To the best of our knowledge, no research has explicitly addressed the question of the social efficiency of European banks (an explanation for the concept of social efficiency is given in the next section), considering not only commercial, but also cooperative banks. Continuing with the work of previous authors [2,[13][14][15], we aim to contribute, not only to empirical research on financial institutions, but also to demonstrate that achieving social efficiency does not necessarily imply a direct decline in an entity's economic goals; this is the primary interest of our research. The purpose of credit cooperatives, framed in the Social Economy, is to create value for workers and society as a whole This is in juxtaposition to commercial banks, where the shareholder value is the main objective [13]; hence, banking specialization (type) can influence in the level of social efficiency of each entity; then, the legal form could thus determine a specific behavior in this line.…”

“…Moreover, their findings indicated that environmental variables play an important role in explaining differences in efficiency. More recent analyses [14] have used the estimated profit and cost efficiencies of banks within a region as a proxy for financial quality, and have concluded that regions with more efficient banks are more resilient to Europe's financial and debt crisis. In addition, bank sector efficiency is related to economic growth.…”

“…The results suggest that a high economic efficiency entails a high socio-environmental efficiency, without necessarily creating an inverse relationship. The previous studies of Lozano-Vivas et al [24] and Belke et al [14] include the country-effect as a determinant for bank efficiency. We will continue their conclusions and focus on country-effect, which will contribute to the European banking harmonization level analysis.…”

“…Multiple objectives might consider for example, the priority of workers' interests [46] to the detriment of economic performance, as might occur when decision-making bodies do not correspond to capital, but mainly to workers and customers. Previous studies [5,13,14,[47][48][49], have focused on the economic efficiency of banks that will prevail because of the sine-qua-non need for existence, the main objective of any bank. Cooperative banks focus on social aspects and are legitimated by society to create value for stakeholders [2,15,34].…”