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Bank productivity growth and convergence in the European Union during the financial crisis

Marta Degl'Innocenti, Stavros Kourtzidis (), Zeljko Sevic and Nickolaos Tzeremes

Journal of Banking & Finance, 2017, vol. 75, issue C, 184-199

Abstract: This paper examines the bank productivity growth and integration process for the 28 EU countries during three main phases of the financial crisis: the U.S. subprime crisis (2007–2008), the global financial crisis (2009–2010) and the sovereign debt crisis (2010–2012). We extend the Malmquist Productivity Index by applying an additive two-stage DEA model. This allows us to explore the sources of growth in different stages of production. Furthermore, we assess the integration of European banks by analyzing the β-convergence and σ-convergence of the two-stage Productivity Index. Our results show a productivity growth during the U.S. subprime crisis, but a consistent decline during the global financial crisis. The loss of competitiveness of the European banking system is due to the drop in growth of the performance stage and technical change. Finally, we find a strong convergence pattern during the financial crisis, mainly driven by the catch up process of some Eastern countries and the drop in performance of Western countries.

Keywords: Banking; European Union; Data envelopment analysis; Two-stage; Productivity growth; Convergence (search for similar items in EconPapers)
JEL-codes: C61 C67 D24 F36 G21 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.jbankfin.2016.11.016

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