Efficiency and Risk-Taking in European Banking
University of Rome III, Italy; Washington University, Saint Louis - Olin Business School
European Central Bank (ECB)
Bangor University, Bangor Business School
December 1, 2009
The recent period of crisis in credit markets has highlighted the crucial role of bank risk taking. Our paper assesses the inter-temporal relationships among bank efficiency, capital and bank risk-taking in the EU-26 commercial banking industry between 1995 and 2007. Our results support the bad management-, luck-, cost and revenue skimping hypotheses. Overall, our paper provides evidence that higher performance (enhanced efficiency) has been not related to higher managerial skills, rather to cost and revenue skimping and bad management.
Keywords: banking risk, capital, efficiency
JEL Classification: G21, D24, C23, E44working papers series
Date posted: October 22, 2010
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