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Efficiency, ownership and financial structure in European banking

Girardone, Claudia and Nankervis, John C and Velentza, Ekaterini‐Fotini (2009) 'Efficiency, ownership and financial structure in European banking.' Managerial Finance, 35 (3). pp. 227-245. ISSN 0307-4358

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<jats:sec><jats:title content-type="abstract-heading">Purpose</jats:title><jats:p>This paper aims to compare the cost efficiencies across bank‐and market‐based EU countries for the different groups of commercial, savings and co‐operative banks; and between listed and non‐listed banking institutions. In addition, it attempts to determine any potential implications for bank efficiency originating from differences in financial structure.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Design/methodology/approach</jats:title><jats:p>Efficiency scores are estimated using the Battese and Coelli's time‐varying stochastic frontier approach. The classification of bank‐ and market‐based financial systems is based on the World Bank's Financial Structure Database.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Findings</jats:title><jats:p>On the whole the results reject the agency theory hypothesis that managers of privately‐owned banks are more cost efficient than those of mutual banking institutions because of capital market devices as it is found that mutual banks operating in EU‐15 countries are significantly more cost efficient than commercial banks. Furthermore, results are mixed concerning the financial structure hypothesis that in developed financial systems bank efficiency should not be statistically different across bank‐vs market‐based economies.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Research limitations/implications</jats:title><jats:p>The analysis suggests that differences in cost efficiency across bank types can often be explained by the prevailing financial system in each economy.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Practical implications</jats:title><jats:p>The evidence illustrates the national diversity of corporate governance systems in Europe and can be important to policy makers who are concerned with the full integration of the European financial system.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Originality/value</jats:title><jats:p>To the best of the authors’ knowledge, there are no previous similar empirical works for the EU banking sector. Such a study has important policy implications especially due to the fact that the EU banking sector is experiencing profound structural changes and a full integration has not yet been achieved.</jats:p></jats:sec>

Item Type: Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 18 Nov 2011 14:34
Last Modified: 23 Sep 2022 18:49

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