Munich Personal RePEc Archive

The cost-efficiency of French banks

Jimborean, Ramona and Brack, Estelle (2010): The cost-efficiency of French banks. Published in: Bankers, Markets and Investors No. 105 : pp. 21-38.

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Abstract

The paper addresses the issue of French banks efficiency, compared to their homologous from Europe and the United States. The analysis is realized on a sample formed by the ten biggest banks from France, Germany, Italy, Spain, the United Kingdom and the United States, over the period 1994-2006. The Data Envelopment Analysis (DEA) method is employed. The results show an improvement in cost-efficiency of French and Spanish banks, while in the other countries a decline in cost-efficiency is noted. We proceed to several tests of convergence, showing that inefficient banks have reduced the gap during the period 1994-2006. In a second step analysis, we focus on the factors standing behind the efficiency scores obtained through DEA methodology. These are bank-specific variables, the macro environment, the regulatory regime and the non-bank financial sector development. We use a standard censured Tobit model and show that capitalized, newly established banks, with tighter ratios of Tier 1 capital and operating in a country with a lower GDP per capita record the highest cost-efficiency scores.

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