New evidence on efficiency and productivity change in European banking

摘要

This paper explores the issue of banking efficiency and productivity in Europe by applying the directional technology distance function to calculate efficiency and productivity measures for a large sample of European banks between 2004 and 2010. The results indicate that inefficiencies range between 22% and 28% across different European banking samples. The smallest banks (total assets up to €5 billion) are the most efficient and the largest sized institutions are the least efficient. The reported figures for the Luenberger productivity measures are rather mixed suggesting both positive and negative productivity changes from year to year for all banking sectors and are found to be ranging from 0.19 to -0.19. Overall, total factor productivity grew in Germany, Austria, Luxembourg, Norway, Denmark, Italy and Spain and declined in Switzerland, Finland, Sweden, Greece and Portugal. The largest average annual growth rates are reported by Spanish and Italian banks (rates of 8.42% and 7.71%, respectively).