The Effect of Specialisation on Banks' Efficiency: An International Comparison

Authors: Pastor, José; Serrano, Lorenzo

Source: International Review of Applied Economics, Volume 20, Number 1, Number 1/January 2006 , pp. 125-149(25)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

This study analyses the effects of specialisation on the cost efficiency of a set of banking systems of the European Union over the period 1992–1998. Unlike in the established literature in which specialisation differences are not considered, in this paper cost inefficiencies are decomposed into two different components: the first is related to the inefficiency associated with the composition of specialisations in each banking system and the second is related to specific inefficiencies of banks within their specialisation. The results show the existence of high cost inefficiencies. However, the intra‐specialisation inefficiencies indicate that the inefficiencies of the European banking systems are much smaller when the effect of productive composition (specialisation) is discounted. This effect is much more evident in those banking systems specialised in the more costly types of business (retail banking) because their composition inefficiency is higher.

Keywords: Efficiency; DEA; specialisation; cluster

Document Type: Research article

DOI: http://dx.doi.org/10.1080/02692170500362868

Affiliations: 1: Universitat de Valencia & Ivie, Valencia, Spain

Publication date: 2006-01-01

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