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Cost efficiency of the banking industry in the South Eastern European region

Christos Staikouras, Emmanuel Mamatzakis and Anastasia Koutsomanoli-Filippaki

Journal of International Financial Markets, Institutions and Money, 2008, vol. 18, issue 5, 483-497

Abstract: This paper analyses cost efficiency in the banking sector of six South Eastern European countries over the period 1998-2003. A stochastic frontier approach, incorporating firm-specific and country-related variables, indicates a generally low level of cost efficiency, with significant inefficiency differences among countries. Foreign banks and banks with higher foreign bank ownership involvement are associated with lower inefficiency. Furthermore, we observe a negative correlation of cost inefficiency with bank capitalization and firm market share, and a positive one with the fraction of loans in the asset portfolio.

Date: 2008
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Handle: RePEc:eee:intfin:v:18:y:2008:i:5:p:483-497