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Exploring the Nexus between Banking Sector Reform and Performance: Evidence from Newly Acceded EU Countries

Sophocles Brissimis (), Manthos Delis () and Nikolaos Papanikolaou ()

No 73, Working Papers from Bank of Greece

Abstract: The aim of this study is to examine the relationship between banking sector reform and bank performance – measured in terms of efficiency, total factor productivity growth and net interest margin – accounting for the effects through competition and bank risk-taking. To this end, we develop an empirical model of bank performance and draw on recent econometric advances to consistently estimate it. The model is applied to bank panel data from ten newly acceded EU countries. The results indicate that both banking sector reform and competition exert a positive impact on bank efficiency, while the effect of reform on total factor productivity growth is significant only toward the end of the reform process. Finally, the effect of capital and credit risk on bank performance is in most cases negative, while it seems that higher liquid assets reduce the efficiency and productivity of banks.

Keywords: Bank performance; Banking sector reform; Competition; Risk-taking (search for similar items in EconPapers)
JEL-codes: G21 L1 C14 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2008-06
New Economics Papers: this item is included in nep-ban, nep-com, nep-eec and nep-tra
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Journal Article: Exploring the nexus between banking sector reform and performance: Evidence from newly acceded EU countries (2008) Downloads
Working Paper: Exploring the nexus between banking sector reform and performance: Evidence from newly acceded EU countries (2008) Downloads
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