Risk and Regulation: The Efficiency of Italian Cooperative Banks

Cristian Barra, Sergio Destefanis and Giuseppe Lubrano Lavadera

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: In this paper we analyse the determination of cost efficiency in a sample of Italian small banks located in different geographical areas and including two great institutional categories: cooperative banks (CB’s) and other banks. We highlight the effect of environmental factors (asset quality, local GDP per capita) on banks’ performance, and provide novel evidence in favour of the “bad luck” hypothesis suggested by Berger and De Young (Journal of Banking and Finance, 1997). Local GDP per capita strongly affects the territorial differentials for technical efficiency, especially for CB’s. This can be easily rationalised, as current regulations hamper CB’s vis-à-vis other banks in their capability to diversify territorially. Our estimates provide us with a tentative quantitative measure of the costs of missing diversification, ranging between 2 and 7 percentage points. Correspondingly, our evidence suggests that there is potentially strong endogeneity in some currently available bank performance indicators.

Keywords: Cooperative banks; Cost efficiency; Local shocks; Territorial diversification (search for similar items in EconPapers)
JEL-codes: D24 G21 L89 (search for similar items in EconPapers)
Date: 2011-07-28
New Economics Papers: this item is included in nep-ban, nep-eff, nep-env and nep-hme
References: Add references at CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.csef.it/WP/wp290.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:sef:csefwp:290

Access Statistics for this paper

More papers in CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Maria Carannante ().