Corporate Governance Productivity Index in Banking Industry: Evidence from the European Banking Industry
Nizar Hachicha Sr.
University of Sfax - Faculty of Economic Sciences & Management
Banking and Finance Review, No. 2, April 2010
Practitioners and regulators increasingly rely on economic theory to measure bank efficiency and liken institutes with each other. These studies lean first on several methods that could be either stochastic or deterministic and second the input-output definition is based on a production or intermediation approach. This restraining modeling is unaware of several factors that can influence meaningfully banking efficiency such as banks’ corporate governance. This paper aims to build a new model to measure bank efficiency. The goal of our model is to remedy existing model failings by the incorporation of the governance system. Our new model results imply contributions at both theoretical and empirical levels. From theoretical point of view, we develop an index to measure corporate governance productivity in the banking industry. This index is obtained by incorporating the governance variables in the usual expression of the directional technology distance function and a new development of the Luenberger productivity indicator. At empirical level, We apply this model on 146 banks dispersed in ten European countries. We show a significant effect of the governance variables on the construction of the technology frontier. In addition we find that the governance systems of Italy, Luxemburg and Netherlands are the more productive than the other systems.
Number of Pages in PDF File: 1
Keywords: corporate governance, technology frontier, banking efficiency, luenberger productivity indicator, directional distance functions
JEL Classification: G21, G34, H21, C13, C67Accepted Paper Series
Date posted: July 21, 2012 ; Last revised: October 24, 2013
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.328 seconds