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Bank Efficiency, Productivity and Convergence in EU countries: A Weighted Russell Directional Distance Model

Fujii, Hidemichi, Managi, Shunsuke, Matousek, Roman, Rughoo, Aarti (2017) Bank Efficiency, Productivity and Convergence in EU countries: A Weighted Russell Directional Distance Model. Europen Journal of Finance, 24 (2). pp. 135-156. ISSN 1351-847X. E-ISSN 1466-4364. (doi:10.1080/1351847X.2017.1303527) (KAR id:60716)

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The objective of this study is three-fold. First we estimate and analyse bank efficiency and productivity changes in the EU28 countries with the application of a novel approach, a weighted Russell directional distance model. Second, we take a disaggregated approach and analyse the contribution of the individual bank inputs on bank efficiency and productivity growth. Third, we test for convergence in EU28 bank productivity as well as in the inefficiency of individual bank inputs. We find that bank efficiency has been undermined by the financial crisis in banks notably from the EU15 countries. We also argue that bank efficiency and productivity in EU countries vary across the banking sector with banks from the ‘old’ EU showing higher efficiency levels. Nonetheless, a noticeable catching up process is observed for banks from the ‘new’ EU countries. Consequently, we do not find evidence of group convergence for bank productivity but there is evidence of convergence in bank efficiency change and technical change among the EU28 countries throughout the period 2005-2014. The driving force seems to be convergent technical change from the old EU Member States’ banks. On the other hand, almost no convergence is detected for the banks’ individual inputs while the transition paths show heightened diversity during the crisis years.

Item Type: Article
DOI/Identification number: 10.1080/1351847X.2017.1303527
Uncontrolled keywords: European Union, Bank Efficiency, Convergence
Subjects: H Social Sciences > HG Finance
Divisions: Divisions > Kent Business School - Division > Kent Business School (do not use)
Depositing User: Roman Matousek
Date Deposited: 04 Mar 2017 20:29 UTC
Last Modified: 16 Feb 2021 13:43 UTC
Resource URI: (The current URI for this page, for reference purposes)
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