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Regional differences in the efficiency of German savings banks

Prof. Dr. Peter Reichling () and M.Sc. Gordon Schulze ()
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Prof. Dr. Peter Reichling: Otto von Guericke University Magdeburg, Faculty of Economics and Management, Department of Banking and Finance, Postbox 4120, 39016 Magdeburg, Germany
M.Sc. Gordon Schulze: Otto von Guericke University Magdeburg, Faculty of Economics and Management, Department of Banking and Finance, Postbox 4120, 39016 Magdeburg, Germany

Credit and Capital Markets, 2018, vol. 51, issue 3, 445-464

Abstract: German savings banks play a key role in financing German SMEs. Accordingly, the analysis of their efficiency is of economic importance. We apply data envelopment analysis to explore the influence of the financial crisis (2007 to 2008) as well as the Eurozone crisis (since the end of 2009) on the effi-ciency of German savings banks. Although the Malmquist index, as a measure of efficiency change and technological change, is on average below one in our sample from 2003 to 2014, we conclude from our efficiency results that German savings banks recovered quickly after the financial crisis as well as the Eurozone crisis. We test for and explain regional efficiency differences between Eastern and Western German savings banks. Since Eastern and Western Germany represent two socio-economically different environments, we control for environmental variables. Our results show that Eastern German savings banks are less inefficient than Western German savings banks since other earning assets, i.e., securities and advances to banks, and refinancing costs are advantageous for their efficiency.

Keywords: Data envelopment analysis; environmental variables; German banking system; Malmquist index (search for similar items in EconPapers)
JEL-codes: C33 C61 G21 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:kuk:journl:v:51:y:2018:i:3:p:445-464

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