Premium
Banking Economic Efficiency In The Deregulation Period: Results From Heteroscedastic Stochastic Frontier Models
Author(s) -
Christopoulos Dimitris K.,
Tsionas Efthymios G.
Publication year - 2001
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00276
Subject(s) - allocative efficiency , deregulation , economics , inefficiency , profitability index , heteroscedasticity , frontier , restructuring , data envelopment analysis , monetary economics , econometrics , financial economics , macroeconomics , finance , microeconomics , statistics , mathematics , history , archaeology
The paper provides quantitative estimates of technical and allocative inefficiency measures of the Greek banking sector in the deregulation period. Such estimates are useful tools for bank managers and policymakers in view of the extensive restructuring of the Greek financial system in recent years, and participation of Greece in the Euro‐zone. The paper generalizes recent approaches based on heteroscedastic stochastic frontier models, and shows how to measure both technical and allocative efficiency in such models. The method is applied to cost function estimation for the banking sector. It is found that technical inefficiency is close to 20 per cent, allocative inefficiency is also a substantial part of costs, averaging 14 per cent, and both components have improved drastically in the deregulation period. This suggests that there is plenty of room for improvement in Greek bank profitability and competitiveness in the new European financial environment.