Title: The cost efficiency of Greek cooperative banks: an application of two-stage data envelopment analysis

Authors: Fotios Pasiouras, Emmanouil Sifodaskalakis, Constantin Zopounidis

Addresses: Financial Engineering Laboratory, Department of Production Engineering & Management, Technical University of Crete, Chania, 73100, Greece. ' Corporate Banking Division, EFG Eurobank, Chania Branch, Chania 73100, Greece. ' Financial Engineering Laboratory, Department of Production Engineering & Management, Technical University of Crete, Chania 73100, Greece

Abstract: This study aims to assess the Cost Efficiency (CE) of the Greek cooperative banks over the period 2000–2005. We first use Data Envelopment Analysis (DEA) to estimate the technical, allocative and cost efficiency for each bank in sample. Then, we use a bootstrapping censored (Tobit) regression approach to determine whether and how internal and external factors influence banks| efficiency. The results of DEA indicate that Greek cooperative banks could improve their cost efficiency by 18.4% on average as well as that the dominant source of cost inefficiency is allocative rather than technical. The results of the second-stage regression indicate that bank total assets and the equity to assets ratio, as well as the GDP per capita and the unemployment rate in the region influence efficiency; however, their impact is not robust across different efficiency measures.

Keywords: banking; cooperative banks; data envelopment analysis; cost efficiency; Malmquist DEA; Greece; technical efficiency; allocative efficiency; Tobit model; bootstrapping; censored regression; internal factors; external factors; second-stage regression; total assets; equity; ratios; GDP per capita; gross domestic product; unemployment rates; financial services management.

DOI: 10.1504/IJFSM.2011.038327

International Journal of Financial Services Management, 2011 Vol.5 No.1, pp.34 - 51

Available online: 28 Jan 2011 *

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