Type of Document Dissertation Author Ichim, Ana Maria Author's Email Address aichim1@tigers.lsu.edu, ana.ichim@gmail.com URN etd-11142012-085642 Title Assessing Cost Efficiency and Economies of Scale in the European Banking System, a Bayesian Stochastic Frontier Approach Degree Doctor of Philosophy (Ph.D.) Department Economics Advisory Committee
Advisor Name Title Terrell, Milton D. Committee Chair Cramer, Gail Committee Member Escobar, Luis A. Committee Member Hill, Carter R. Committee Member McMillin, Douglas W. Committee Member Keywords
- Bayesian analysis
- European banks
- cost efficiency
- stochastic frontier
Date of Defense 2012-10-24 Availability unrestricted Abstract Cost efficiency of banks is a key indicator that provides valuable insight to researchersand policymakers about the functioning of the financial intermediation process, as well as,
the overall performance of the entire financial system.
This thesis focuses on the cost efficiency of the European banking market for which we
identify fourteen nation-specific frontiers and also perform cross country comparisons under
a common frontier assumption. Our interest in the subject is twofold. At the nation
level, cost efficiency influences the relative competitiveness of banks, setting the profile of
the national banking industry with direct implications on economic growth. At the
European Union level, the financial, institutional and regulatory integration raise questions
about the existence of a common cost frontier or the presence of economies of scale as they
could encourage banks to take advantage of the single market and consolidate.
The empirical approach uses a more general Bayesian stochastic frontier model that
allows for a continuous shift from the individual frontiers of each country to the common
"European" frontier through varying priors.
Results show differences in the frontiers of the countries that we studied, and the selected
banks exhibit economies of scale greater than one more often than not, irrespective of size.
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