Integration and Efficiency in EU Banking Markets
Essex Finance Centre Discussion Paper No. 08/01
Posted: 23 Aug 2009
Date Written: August 4, 2008
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: Suggested Citation