Integration and Efficiency in EU Banking Markets

Essex Finance Centre Discussion Paper No. 08/01

Posted: 23 Aug 2009

See all articles by Barbara Casu

Barbara Casu

City University London - Sir John Cass Business School

Claudia Girardone

Essex Business School - University of Essex

Date Written: August 4, 2008

Abstract

Evidence of financial integration and convergence are considered of importance in assessing the outcome of EU deregulation policies aimed at improving the efficiency and performance of banking sectors. This paper evaluates the recent dynamics of bank cost efficiency by means of Data Envelopment Analysis (DEA). Borrowing from the growth literature, we apply dynamic panel data models (GMM) to the concepts of β-convergence and σ-convergence to assess the speed at which banking markets are integrating. We also employ a partial adjustment model to evaluate convergence towards best practice. Results seem to provide supporting evidence of convergence of efficiency levels towards an EU average. Nevertheless, there is no evidence of an overall improvement of efficiency levels towards best practice.

Keywords: Efficiency, Convergence, Banking, Data Envelopment Analysis

JEL Classification: G21, D24

Suggested Citation

Casu, Barbara and Girardone, Claudia, Integration and Efficiency in EU Banking Markets (August 4, 2008). Essex Finance Centre Discussion Paper No. 08/01, Available at SSRN: https://ssrn.com/abstract=1200384

Barbara Casu (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Claudia Girardone

Essex Business School - University of Essex ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
+44 1206874156 (Phone)
+44 1206873429 (Fax)

HOME PAGE: http://www.essex.ac.uk/ebs/staff/profile.aspx?ID=1045

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