Bank Efficiency in Transitional Countries: Sensitivity to Stochastic Frontier Design

Zuzana Irsova

No wp998, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: This article provides an empirical insight on the heterogeneity in the estimates of banking efficiency produced by the stochastic frontier ap- proach. Using data from five countries of Central and Eastern Europe, we study the sensitivity of the efficiency score and the efficiency ranking to a change in the design of the frontier. We found that the average scores are significantly smaller when the transcendental logarithmic functional form is used in the profit efficiency measurement and when the scaling effect is neglected in the cost efficiency measurement. The implied bank ranking is robust to changes in the stochastic frontier definition for cost efficiency, but not for profit efficiency.

Keywords: Banking; Eciency Analysis; Stochastic Frontier Approach; Transitional Countries (search for similar items in EconPapers)
JEL-codes: C13 G21 L25 (search for similar items in EconPapers)
Pages: pages
Date: 2010-09-01
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 (2)

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Related works:
Journal Article: Bank Efficiency in Transitional Countries: Sensitivity to Stochastic Frontier Design (2011)
Working Paper: Bank Efficiency in Transitional Countries: Sensitivity to Stochastic Frontier Design (2010)
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