Do Interconnections Matter for Bank Efficiency?

Solange Guerra, Benjamin Tabak and Rodrigo Miranda

No 374, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper addresses the issue of how individual bank interconnectivity and the interbank network topology impact on Brazilian banking efficiency between 2007 and 2013. We use several network measures to analyze the effects of bank interconnections on cost, profit and risk-taking efficiency. The results suggest that interconnections matter for bank efficiency. We find that interconnectivity can increase cost and risk-taking inefficiency levels. We also find that the density of the network topology can reduce profit and risk-taking inefficiency levels.

Date: 2014-12
New Economics Papers: this item is included in nep-ban, nep-eff and nep-net
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