Intermediation Efficiency of Banks in South-East Europe: An Empirical Assessment Using Dea and Malmquist Index

Valentin Z. Toci and Iraj Hashi
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Valentin Z. Toci: University of Prishtina, Fakulteti Ekonomik pn, Prishtina, 10000, Republic of Kosovo
Iraj Hashi: Staffordshire University, Leek Road, Stoke on Trent,ST4 2DF, United Kingdom

International Journal of Finance & Banking Studies, 2013, vol. 2, issue 3, 01-20

Abstract: By employing non-parametric methods, namely Data Envelopment Analysis and Malmquist Index, this paper investigates efficiency of banks using a database of almost all banks in four countries inSouth-East Europe. The superior efficiency of foreign-owned banks in intermediation is supported. It is argued that the improvement in efficiencyof banks originated from the change in technology rather than scale and technical efficiency, and banks on average have not been able to catch-up with best-performers, thus widening the efficiency gap. The largest sources of inefficiency are found to be cost and scale inefficiencies and lending shortfalls. Because of its peculiarities, Kosovobanking sector is assessed relative to other economies. Findings suggest that despite some improvements, the banking system in Kosovo remained less efficient. Anumber of policy implications emanate from the findings,aiming at enhancing the intermediation efficiency of banksin the context of South-East European transition.

Keywords: Bank efficiency; Data Envelopment Analysis; Malmquist Index; South-East Europe (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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