Bank Efficiency in the Enlarged European Union

Dániel Holló and Márton Nagy ()
Additional contact information
Dániel Holló: Magyar Nemzeti Bank (at the time of writing the study)
Márton Nagy: Magyar Nemzeti Bank

No 2006/3, MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: This paper aims to estimate bank efficiency differences across member states of the European Union and tries to explain their causes. We show on an empirical basis that the level and spread of bank efficiency in the EU and their changes are significantly determined by characteristics of operational environment and the “conscious” behaviour of management.In the long term, through the integration of financial markets and institutions, as well as the establishment of the Single European Banking Market, the impact of advantages and disadvantages underlying the operational environment is reduced or eliminated; therefore only managerial ability is of any relevance. Our findings suggest that there is a costefficiency gap and convergence between the old and new member states, irrespective of the specifications of the model. With respect to profit efficiency, however, differences in efficiency between the two regions are only established after controlling for some major characteristics of the varying operational environments. Our study also investigates the relevance of and the correlation between accounting-based and statistics-based efficiency indicators. We conclude that the accounting based efficiency indicators are inadequate for managing heterogeneity arising from institutional and operational environments. Hence such indicators only allow limited cross-sectional comparison through time.

Keywords: parametric approach; X- and alternative profit-efficiency; Fourier-flexible functional form; banking system. (search for similar items in EconPapers)
JEL-codes: F36 G15 G21 G34 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2006
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fin and nep-fmk
References: Add references at CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.mnb.hu/letoltes/wp2006-3.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mnb:wpaper:2006/3

Access Statistics for this paper

More papers in MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary) Contact information at EDIRC.
Bibliographic data for series maintained by Lorant Kaszab ( this e-mail address is bad, please contact ).