- EFFICIENCY AND RISK MANAGEMENT IN BANKING FIRMS: A METHOD TO DECOMPOSE RISK

José Pastor

Working Papers. Serie EC from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: Traditional efficiency measures neglect bank risk and, even when risk is accounted for, do not differentiate between the portion subject to managerial control (¿internal¿) versus the portion that is exogenous and is part of a changing environment (¿external¿). This paper proposes a new sequential DEA procedure which decomposes a major indicator of bank risk --provision for loanlosses (PLL)-- into internal and external components. Our decomposition methodology is contrasted with three alternatives to judge how different approaches to this problem may affect the results. The analysis is illustrated by application to the Spanish banking system where deregulation, imposed by the Single Market Program of the European Community, has affected banks¿ conduct in terms of efficiency and risk. Las medidas tradicionales de eficiencia no consideran el riesgo y aquellas que pretenden incluirriesgo no distinguen la parte que sí es debida a la gestión empresarial (interna) de la parte que esexógena a las empresas y que depende del ambiente económico (externa). En este trabajo sepropone un nuevo procedimiento DEA secuencial que descompone uno de los principales indicadoresde riesgo -las provisiones por prestamos de dudoso cobro (PLL)-en sus dos componentes interno yexterno. La metodología propuesta se contrasta con tres alternativas diferentes para valorar sidiferentes enfoques a la medición de este problema pueden afectar a los resultados. El método seilustra con una aplicación para el sistema bancario español, donde la desregulación, impulsada por elMercado Unico ha afectado a la conducta de los bancos en términos de la eficiencia y riesgo.

Keywords: Riesgo; entorno; DEA. Risk; environment; DEA. (search for similar items in EconPapers)
Pages: 35 pages
Date: 1998-05
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Published by Ivie

Downloads: (external link)
http://www.ivie.es/downloads/docs/wpasec/wpasec-1998-10.pdf Fisrt version / Primera version, 1998 (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:ivi:wpasec:1998-10

Access Statistics for this paper

More papers in Working Papers. Serie EC from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) Contact information at EDIRC.
Bibliographic data for series maintained by Departamento de Edición ().