Evaluating Cost and Profit Efficiency: A Comparison of Parametric and Non-Parametric Methodologies

Posted: 16 Jun 2008 Last revised: 14 Jun 2010

See all articles by Manthos D. Delis

Manthos D. Delis

Montpellier Business School

Anastasia Koutsomanoli-Filippaki

Bank of Greece - Economic Research Department

Christos Staikouras

Athens University of Economics and Business - Department of Accounting and Finance

Abstract

This paper's objective is twofold. First it provides an empirical assessment of the cost and profit stochastic frontiers based on a panel dataset of Greek commercial banks over the 1993-2005 period. Second, on the basis of the same sample, it also compares the most widely used parametric and non-parametric techniques to cost efficiency measurement, namely the Stochastic Frontier Approach and Data Envelopment Analysis. The results suggest greater similarities between the predictions of cost and profit efficiency methods than between parametric and non-parametric techniques. Such evidence is new in the literature and calls for a more technically level playing field for estimating bank efficiency.

Keywords: Bank cost and profit efficiency, Parametric and non-parametric methods

JEL Classification: C14, G21, L25

Suggested Citation

Delis, Manthos D. and Koutsomanoli-Filippaki, Anastasia and Staikouras, Christos, Evaluating Cost and Profit Efficiency: A Comparison of Parametric and Non-Parametric Methodologies. Applied Financial Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1146390

Manthos D. Delis (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Anastasia Koutsomanoli-Filippaki

Bank of Greece - Economic Research Department ( email )

21 E. Venizelos Avenue
GR 102 50 Athens
Greece

Christos Staikouras

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
Athens, 104 34
Greece
+30 210 8203 459 (Phone)

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