International evidence on the impact of regulations and supervision on banks’ technical efficiency: an application of two-stage data envelopment analysis

International evidence on the impact of regulations and supervision on banks’ technical... This study uses a sample of 715 banks from 95 countries and two-stage data envelopment analysis (DEA) to provide international evidence on the impact of regulations and supervision approaches on banks’ efficiency. We first use DEA to estimate technical and scale efficiency. We then use Tobit regression to investigate the impact of several regulations related to capital adequacy, private monitoring, banks’ activities, deposit insurance schemes, disciplinary power of the authorities, and entry into banking on banks’ technical efficiency. We estimate several specifications while controlling for bank-specific attributes and country-level characteristics accounting for macroeconomic conditions, financial development, market structure, overall institutional development, and access to banking services. In several cases, the results provide evidence in favour of all three pillars of Basel II that promote the adoption of strict capital adequacy standards, the development of powerful supervisory agencies, and the creation of market disciplining mechanisms. However, only the latter one is significant in all of our specifications. While the remaining regulations do not appear to have a robust impact on efficiency, several other country-specific characteristics are significantly related to efficiency. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

International evidence on the impact of regulations and supervision on banks’ technical efficiency: an application of two-stage data envelopment analysis

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Publisher
Springer US
Copyright
Copyright © 2007 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-007-0046-7
Publisher site
See Article on Publisher Site

References

  • Efficiency in European banking
    Altunbas, Y; Gardener, EPM; Molyneux, P; Moore, B
  • Consistency conditions for regulatory analysis of financial institutions: a comparison of frontier efficiency methods
    Bauer, PW; Berger, AN; Ferrier, GD; Humphrey, DB
  • Capital, portfolio, and growth: bank behavior under risk-based capital guidelines
    Beatty, AL; Gron, A
  • Banking efficiency in the Nordic Countries
    Berg, SA; Forsund, FR; Hjalmarson, L; Suominen, M
  • The dominance of inefficiencies over scale and product mix economies in banking
    Berger, AN; Humphrey, DB

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