Efficiency of the Bulgarian Banking System: Traditional Approach and Data Envelopment Analysis

Nikolay Nenovsky (), Petar Chobanov (), Gergana Mihaylova-Borisova and Darina Koleva ()

ICER Working Papers from ICER - International Centre for Economic Research

Abstract: The present paper traces the trends in the development of the Bulgarian banking system focusing on the dynamics of bank efficiency. Although the financial crisis in 1996-1997 and the following shift in monetary regime (introduction of Currency Board Arrangement) exerted significant influence on the development of the banking sector characteristics, the study covers only the period of 1999-2006 because of the lack of consistent available data prior to 1999. During the period analysed, the impact on bank efficiency of the following factors is studied: change in property, penetration of foreign commercial banks on the local banking market, competition, structure of bank assets and liabilities, central bank policy in regard to credit activity, etc. The limits of traditional accounting approaches to bank efficiency evaluation are discussed, as well as the implementation of non-parametric methods, in particular Data Envelopment Analysis (DEA). Different specifications of DEA like the intermediation and operating approaches were applied to separate groups and sub-groups. The results show that: firstly, foreign banks perform better than domestic and state-owned banks because of the technological and managerial improvements; and secondly, large banks are more efficient than small banks due to decreasing operating costs and scale economies.

Keywords: DEA; bank efficiency; Bulgarian banking system; foreign banks (search for similar items in EconPapers)
JEL-codes: C61 G21 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2008-06
New Economics Papers: this item is included in nep-ban, nep-eff and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Efficiency of the Bulgarian Banking System: Traditional Approach and Data Envelopment Analysis (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:icr:wpicer:22-2008

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