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Efficiency under quantile regression: What is the relationship with risk in the EU banking industry?
Author(s) -
KoutsomanoliFilippaki Anastasia I.,
Mamatzakis Emmanuel C.
Publication year - 2011
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2011.04.001
Subject(s) - quantile regression , quantile , econometrics , statistics , conditional probability distribution , regression , mathematics , economics
This study estimates cost efficiency under a quantile regression framework. Our purpose is to investigate whether cost efficiency differs across quantiles of the conditional distribution. Efficiency scores are derived using the distribution‐free approach. Results show that for higher conditional distributions, efficiency scores are lower. In a second stage analysis, we examine the relationship between efficiency and risk, measured as distance to default. Cross section regressions show that the higher the risk, the lower the level of efficiency. The magnitude and the significance of the coefficient of the distance to default increases for conditional distributions associated with lower levels of efficiency.