Institutions and Bank Performance: A Stochastic Frontier Analysis

Robert Lensink and Aljar Meesters

Oxford Bulletin of Economics and Statistics, 2014, vol. 76, issue 1, 67-92

Abstract: type="main" xml:lang="en">

This article investigates the impact of institutions on bank efficiency and technology, using a stochastic frontier analysis of a data set of 7,959 banks across 136 countries over 10 years. The results confirm the importance of well-developed institutions for the efficient operation of commercial banks. Furthermore, the insights reveal the impact of institutional reforms in improving bank efficiency. The results are robust to adjustments in country-specific effects, achieved by including country dummies, as well as across different risk profiles. Moreover, they provide empirical evidence in support of the public view of the banking sector.

Date: 2014
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