Title page for ETD etd-11142012-085642


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 researchers

and 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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