Selected paper

Boďa, Martin Zimková, Emília
An Insight into SBM Efficiency of Slovak Commercial Banks
Year: 2014
Volume: 5
Issue: 2
Pages: 7-25
JEL: G21, C44
DOI: 10.5817/FAI2014-2-1

PDF

Keywords:
efficiency, Slovak banking industry, SBM model, the profit approach

Abstract:
The paper investigates into the efficiency of the Slovak banking industry over the years 2000–2011 through the prism of the profit approach to the perception of efficiency of commercial banks. More precisely, the aim of the paper is to benchmark individual commercial banks with respect to their efficiency status under the profit definition of efficiency. Nonetheless, massive structural changes that took place in the Slovak economy also affected significantly the development of the Slovak banking sector and gave rise to shifts in its production function. In order to include these qualitative changes into consideration, the entire period of 12 years was – on economic grounds – divided into three consecutive non-overlapping sub-periods (2000–2003, 2004–2008, 2009–2011) during which the production function may be viewed stable and free of qualitative alterations. A panel of 11 organizational units (i.e. commercial banks) of the Slovak banking sector was identified, and under the assumption of the production function being constant and shiftless in the three sub-periods the data on them were pooled together for each of the three sub-periods. In evaluating their technical efficiency in the individual three sub-periods, a non-parametric method of evaluation is employed based on the slack-based measure (SBM) model of data envelopment analysis. During the period of 12 years examined, Slovenská sporiteľňa maintained a comparatively high SBM technical efficiency and other Slovak banks were subject to positive or negative changes in their comparative efficiency profile. The paper further demonstrates how this information can be used outside the academic sphere with an accent laid upon the stockholders and the management of the commercial banks under investigation.

References:

Anayiotos, G., Toroyan, H., Vamvakidis, A. (2010). The efficiency of emerging Europe′s banking sector before and after the recent economic crisis. Financial Theory and Practice, vol. 34, iss. 3, pp. 247-267. Benston, G. (1965). Branch banking and economies of scale. Journal of Finance, vol. 20, no. 2, pp. 312-331. DOI: 10.1111/j.1540-6261.1965.tb00212.x Berger, A. N., Hanweck, G. A., Humphrey, D. B. (1987). Competitive viability in banking: Scale, Scope and Product Mix Economies. Journal of Monetary Economics, vol. 20, pp 501-520. DOI: 10.1016/0304-3932(87)90039-0 Berger, A. N., Humphrey, D. B. (1997). Efficiency of financial institutions: international survey and directions for future research. European Journal of Operational Research, vol. 98, number 2, pp. 175-212. DOI: 10.1016/S0377-2217(96)00342-6 Berger, A. N., Mester, L. (2003). Explaining the dramatic changes in performance of US banks: Technological change, deregulation, and dynamic changes in competition. Journal of Financial Intermediation, vol. 12, pp. 57-95. DOI: 10.1016/S1042-9573(02)00006-2 Boďa, M., Zimková, E. (2013). A Cobb-Douglasian production function of the Slovak banking sector under the intermediation approach. Financial management of firms and financial institutions. Ostrava: Ekonomická fakulta Vysoké školy báňské - Technické univerzity Ostrava, pp. 54-63. Cooper, W. W., Seiford, L. M., Tone, K. (2007). Data envelopment analysis. New York: Springer, 2007. Grigorian, D., Manole, V. (2002). Determinants of commercial bank performance in transition: an application of data envelopment analysis. Working Paper No. 146. Washington: International Monetary Fund. Kenjegalieva, K. A., Simper, R., Weyman-Jones, T. G. (2009). Efficiency in transition banks: inter-country banking industry trends. Applied Financial Economics. vol. 19, pp. 1531-1546. DOI: 10.1080/09603100902984343 Koch, T. W., MacDonald, S. S. (2010). Bank management. 7th ed. Mason (OH, USA): South-Western. Mishkin, F. S. (2007). Economics of money, banking and financial markets. 8th ed. Upper Saddle River (NJ, USA): Prentice-Hall, 2007. Oh, D.-H., Suh, D. (2013) nonparaeff: nonparametric methods for measuring efficiency and productivity, R package, version 0.5-8 of 2013-02-22, http://cran.r-project.org/web/packages/nonparaeff/index.html. R Development Core Team (2013). R: a language and environment for statistical computing. Vienna: R Foundation for Statistical Computing, http://www.r-project.org/. Sealey, C. W., Lindley, J. T. (1977), Inputs, outputs and a theory of production and cost at depository financial institutions. Journal of Finance, vol. 32, no. 8, pp. 1251-1266. Stavárek, D., Řepková, I. (2012). Efficiency in the Czech banking industry: A non-parametric approach. Acta Universitatis Agriculturae et Silviculturae Mendeleianae Brunensis, vol. LX, number 2, pp. 357–366. DOI: 10.11118/actaun201260020357 Stavárek, D. (2006). Banking efficiency in the context of European integration. Eastern European Economics, vol. 44, number 4, pp. 5-31. DOI: 10.2753/EEE0012-8775440401 Tomova, M. (2006). X-efficiency of European banking – inequality and convergence. Free University of Brussels. Vincová, K. (2006). Neefektívnosť z rozsahu v bankovom sektore. Komparácia slovenského a českého bankového sektora. In Národná a regionálna ekonomika VI, Herľany. Košice: Technická univerzita v Košiciach, pp. 440-445. Wozniewska, G. (2008). Methods of measuring the efficiency of commercial banks: an example of Polish banks. Ekonomika, number 84, pp. 81-91. Zemanová, V. (2007). Aplikácia metódy DEA na bankový sektor Slovenskej republiky. In Proceedings from the conference AIESA Mladá veda 2007. Bratislava: Ekonóm.

Call for papers

Call for papers is permanently open for articles across all the research areas.

tel.: +420 549 494 683 | e-mail: fai@econ.muni.cz
© Copyright 2010–13 IFT