 Applying the New Metafrontier Directional Distance Function to Compare Banking Efficiencies in Central and Eastern European CountriesTai-Hsin Huang, Dien-Lin Chiang and Chao-Min Tsai Economic Modelling, 2015, vol. 44, issue C, 188-199 Abstract: This paper establishes a new metafrontier directional technology distance function (MDDF) under a stochastic framework, rather than a deterministic setting like the one proposed by Battese et al. (2004). The new MDDF allows for calculating comparable technical efficiencies for banks under different technologies relative to the potential technology available to the industry across nations. The inefficiency term of the new MDDF is further associated with relevant environmental variables of the form proposed by Battese and Coelli (1995). The new MDDF is then applied to examine and compare bank efficiencies of 17 Central and Eastern European countries. Non-performing loans (NPLs) are regarded as an undesirable, jointly produced with various loans, and the omission of them tends to underestimate technical inefficiency scores. Evidence is found that the estimated technology gap dominates technical efficiencies. Bank managers are suggested to swiftly adopt new financial innovations with an eye to shift the group frontier closer to the metafrontier. Keywords: metafrontier directional distance function; technical efficiencies; environmental variables; undesirable output (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:44:y:2015:i:c:p:188-199 DOI: 10.1016/j.econmod.2014.10.029 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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