Privatization, Foreign Bank Entry and Bank Efficiency in Croatia: A Fourier-Flexible Function Stochastic Cost Frontier Analysis

Evan Kraft, Richard Hofler and James Payne

No 9, Working Papers from The Croatian National Bank, Croatia

Abstract: Using bank balance sheet data for 1994-2000, this paper estimates a Fourier-flexible frontier cost function. Specification tests indicate that the stochastic frontier model with a Fourier-flexible form with a truncated normal distribution of the inefficiency term allowing for time varying technical efficiency is preferred. The results show that new private and privatized banks, contrary to some expectations, are not the most efficient banks through most of the period. Privatization also does not seem to have an immediate effect on improved efficiency. However, better cost efficiency is associated with a lower likelihood of failure, suggesting that better risk management and better cost management are signs of better management in general. Finally, foreign banks have substantially better efficiency scores than all categories of domestic banks.

Keywords: envelopment analysis; efficiency frontier; operating approach; intermediation approach; Croatia; banks (search for similar items in EconPapers)
JEL-codes: C4 G21 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2002-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Privatization, foreign bank entry and bank efficiency in Croatia: a Fourier-flexible function stochastic cost frontier analysis (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hnb:wpaper:9

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