Research output: Contribution to Journal/Magazine › Journal article › peer-review
Technical and allocative efficiency in European banking. / Brissimis, Sophocles N.; Delis, Manthos D.; Tsionas, Michael.
In: European Journal of Operational Research, Vol. 204, No. 1, 01.07.2010, p. 153-163.Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Technical and allocative efficiency in European banking
AU - Brissimis, Sophocles N.
AU - Delis, Manthos D.
AU - Tsionas, Michael
PY - 2010/7/1
Y1 - 2010/7/1
N2 - This paper specifies an empirical framework for estimating both technical and allocative efficiency using the translog cost-share system, thus providing a solution to the issue known in the literature as the Greene problem. The model is applied to a large panel of European banks and the results are compared with those of a model that does not include an allocative inefficiency term and also with those obtained by using a consistent Bayesian technique. Our results suggest that models which include only technical efficiency, significantly overestimate it, while parameter estimates from the model that includes both technical and allocative efficiency are very close to the ones obtained from the Bayesian approach, thus enhancing our confidence in the proposed methodology. Finally, the fact that allocative efficiency of banks in our sample improves more than technical efficiency underlines the importance of including an allocative inefficiency component in parametric efficiency models.
AB - This paper specifies an empirical framework for estimating both technical and allocative efficiency using the translog cost-share system, thus providing a solution to the issue known in the literature as the Greene problem. The model is applied to a large panel of European banks and the results are compared with those of a model that does not include an allocative inefficiency term and also with those obtained by using a consistent Bayesian technique. Our results suggest that models which include only technical efficiency, significantly overestimate it, while parameter estimates from the model that includes both technical and allocative efficiency are very close to the ones obtained from the Bayesian approach, thus enhancing our confidence in the proposed methodology. Finally, the fact that allocative efficiency of banks in our sample improves more than technical efficiency underlines the importance of including an allocative inefficiency component in parametric efficiency models.
KW - Technical and allocative efficiency
KW - Translog cost function
KW - Maximum likelihood
KW - European banking
U2 - 10.1016/j.ejor.2009.09.034
DO - 10.1016/j.ejor.2009.09.034
M3 - Journal article
VL - 204
SP - 153
EP - 163
JO - European Journal of Operational Research
JF - European Journal of Operational Research
SN - 0377-2217
IS - 1
ER -