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Efficiency and Risk-Taking in European Banking

Franco Fiordelisi, David Marques-Ibanez () and Philip Molyneux ()

No 9004, Working Papers from Bangor Business School, Prifysgol Bangor University (Cymru / Wales)

Abstract: The recent period of crisis in credit markets has highlighted the crucial role of bank risk taking. Our paper assesses the inter-temporal relationships among bank efficiency, capital and bank risk-taking in the EU-26 commercial banking industry between 1995 and 2007. Our results support the bad management-, luck-, cost and revenue skimping hypotheses. Overall, our paper provides evidence that higher performance (enhanced efficiency) has been not related to higher managerial skills, rather to cost and revenue skimping and bad management.

Keywords: banking risk; capital; efficiency (search for similar items in EconPapers)
JEL-codes: G21 D24 C23 E44 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2009-12
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