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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - An Innovative Bayesian Multiple Indicator-Multiple Cause Analysis of Bank Productivity
AU - Izzeldin, Marwan
AU - Mamatzakis, Emmanuel C.
AU - Murphy, Anthony
AU - Pappas, Vasileios
AU - Tsionas, Mike
PY - 2025/8/8
Y1 - 2025/8/8
N2 - Using Bayesian Monte Carlo methods, we augment a stochastic distance function measure of bank efficiency and productivity growth with indicators of financial stability, profitability, and capitalization. Our novel Multiple Indicator-Multiple Cause (MIMIC)-style model provides more precise estimates of policy-relevant parameters, including bank efficiency and productivity growth. Analyzing EU-15 banks from 2008 to 2015, we find significant disparities in efficiency, revealing a ‘two-speed’ banking sector. Productivity growth has declined, driven primarily by technological regress rather than managerial inefficiencies. Small and peripheral banks exhibit lower efficiency than larger, core-EU banks, though productivity growth appears stronger among smaller institutions. We show that greater technical efficiency is associated with higher profitability, capitalization, and financial stability, as well as reduced earnings volatility.
AB - Using Bayesian Monte Carlo methods, we augment a stochastic distance function measure of bank efficiency and productivity growth with indicators of financial stability, profitability, and capitalization. Our novel Multiple Indicator-Multiple Cause (MIMIC)-style model provides more precise estimates of policy-relevant parameters, including bank efficiency and productivity growth. Analyzing EU-15 banks from 2008 to 2015, we find significant disparities in efficiency, revealing a ‘two-speed’ banking sector. Productivity growth has declined, driven primarily by technological regress rather than managerial inefficiencies. Small and peripheral banks exhibit lower efficiency than larger, core-EU banks, though productivity growth appears stronger among smaller institutions. We show that greater technical efficiency is associated with higher profitability, capitalization, and financial stability, as well as reduced earnings volatility.
M3 - Journal article
JO - Review of Quantitative Finance and Accounting
JF - Review of Quantitative Finance and Accounting
SN - 0924-865X
ER -