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Institutions and Bank Performance: A Stochastic Frontier Analysis *
Author(s) -
Lensink Robert,
Meesters Aljar
Publication year - 2014
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12002
Subject(s) - stochastic frontier analysis , frontier , set (abstract data type) , economics , business , empirical evidence , econometrics , financial system , macroeconomics , computer science , political science , production (economics) , philosophy , epistemology , law , programming language
This article investigates the impact of institutions on bank efficiency and technology, using a stochastic frontier analysis of a data set of 7,959 banks across 136 countries over 10 years. The results confirm the importance of well‐developed institutions for the efficient operation of commercial banks. Furthermore, the insights reveal the impact of institutional reforms in improving bank efficiency. The results are robust to adjustments in country‐specific effects, achieved by including country dummies, as well as across different risk profiles. Moreover, they provide empirical evidence in support of the public view of the banking sector.