Efficient or Fortunate? The Impact of Environmental Economic Conditions on Co-Operative Banks

26 Pages Posted: 10 Apr 2009

See all articles by Franco Fiordelisi

Franco Fiordelisi

University of Essex - Essex Business School; University of Rome III, Italy

Vincenzo Farina

University of Rome Tor Vergata

Battaglia Francesca

affiliation not provided to SSRN

Ornella Ricci

University of Roma Tre, Department of Business Studies

Date Written: December 1, 2008

Abstract

This paper analyses the cost and profit efficiency of Italian co-operative banks. These small financial institutions have homogeneous business model and their performance is strongly influenced by the economic conditions of their local markets. As recognised by various recent studies (Bos et al., 2008), the efficiency measurement has to account for the heterogeneity of environmental conditions. By using a sample of 2683 year observations collected between 2000 and 2005, we estimated cost and profit efficiency using the Stochastic Frontier Analysis and including various environmental variables accounting for disparities among Italian regions. Our results provide evidence that banks in the North-East of Italy are more cost efficient, taking advantage of a favourable environment, while banks in the South of Italy display a higher profit efficiency, probably due to lower competitive pressures.

Keywords: co-operative banks, efficiency, SFA, environmental variables

JEL Classification: G21, D2

Suggested Citation

Fiordelisi, Franco and Farina, Vincenzo and Francesca, Battaglia and Ricci, Ornella, Efficient or Fortunate? The Impact of Environmental Economic Conditions on Co-Operative Banks (December 1, 2008). Available at SSRN: https://ssrn.com/abstract=1376217 or http://dx.doi.org/10.2139/ssrn.1376217

Franco Fiordelisi (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

University of Rome III, Italy ( email )

Via Silvio D'amico, 77
Rome, Rome 00145
Italy

HOME PAGE: http://host.uniroma3.it/docenti/fiordelisi/?home

Vincenzo Farina

University of Rome Tor Vergata ( email )

Via Columbia n.2
Rome, rome 00133
Italy
+390672595903 (Phone)
+39062040219 (Fax)

HOME PAGE: http://economia.uniroma2.it/faculty/104/farina-vincenzo

Battaglia Francesca

affiliation not provided to SSRN ( email )

Ornella Ricci

University of Roma Tre, Department of Business Studies ( email )

Via Ostiense, 159
Rome, RM 00145
Italy

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