Title: Efficiency and scale economies in banking in new EU countries

Authors: Roman Matousek

Addresses: London Metropolitan Business School, 84 Moorgate, London EC2M 6SQ, UK

Abstract: In this paper, we provide empirical evidence on bank cost-efficiency in transition countries. Our estimates of the cost-efficiency using a distribution-free approach suggests that among the countries analysed, Estonia, Latvia and Slovenia display the highest X-efficiency while the Czech Republic and Poland show the lowest X-efficiency. Reported X-inefficiency is found to be lowest in the segment of foreign banks that were on average more efficient than other banks. The efficiency of small and foreign banks was also higher when compared with large state-owned banks. Results also indicate that economies of scale decrease with bank size.

Keywords: cost efficiency; transition economies; EU banking; European Union; Estonia; Latvia; Slovenia; Czech Republic; Poland; small banks; foreign banks; state-owned banks.

DOI: 10.1504/IJMEF.2008.020633

International Journal of Monetary Economics and Finance, 2008 Vol.1 No.3, pp.235 - 249

Published online: 06 Oct 2008 *

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