A Novel MIMIC-Style Model of European Bank Technical Efficiency and Productivity Growth

Marwan Izzeldin, Emmanuel Mamatzakis, Anthony Murphy () and Mike Tsionas

No 2012, Working Papers from Federal Reserve Bank of Dallas

Abstract: Using Bayesian Monte Carlo methods, we augment a stochastic distance function measure of bank efficiency and productivity growth with indicators of capitalization, return and risk. Our novel Multiple Indicator-Multiple Cause (MIMIC) style model generates more precise estimates of policy relevant parameters such as returns to scale, technical inefficiency and productivity growth. We find considerable variation in the performance of EU-15 banks over the period 2008 to 2015. For the vast majority of banks, productivity growth – the sum of efficiency and technical changes – is negative, implying that the industry would benefit from innovation. We show that greater technical efficiency is associated with higher profitability, higher capital, a lower probability of default and lower return volatility.

Keywords: Multiple Indicators-Multiple Causes (MIMIC); technical efficiency; productivity growth; EU banks (search for similar items in EconPapers)
JEL-codes: C11 C51 D24 G21 (search for similar items in EconPapers)
Pages: 36
Date: 2020-05-19
New Economics Papers: this item is included in nep-ban, nep-eff, nep-ore and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.dallasfed.org/-/media/documents/research/papers/2020/wp2012.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:88038

Ordering information: This working paper can be ordered from

DOI: 10.24149/wp2012

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Dallas Contact information at EDIRC.
Bibliographic data for series maintained by Amy Chapman ().