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Determinants of Commercial Bank Performance in Transition: An Application of Data Envelopment Analysis

29 Pages Posted: 1 Feb 2006  

David Grigorian

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2002

Abstract

Banking sectors in transition economies have experienced major transformations throughout the 1990s. While some countries have been successful in eliminating underlying distortions and restructuring their financial sectors, in some cases financial sectors remain underdeveloped and the rates of financial intermediation continue to be low. We estimate indicators of commercial bank efficiency by applying a version of Data Envelopment Analysis (DEA) to bank-level data from a wide range of transition countries. In addition to stressing the importance of some bank-specific variables, the censored Tobit analysis suggests that (1) foreign ownership with controlling power and enterprise restructuring enhances commercial bank efficiency; (2) the effects of prudential tightening on the efficiency of banks vary across different prudential norms; and (3) consolidation is likely to improve the efficiency of banking operations. Overall, the results confirm the usefulness of DEA for transition-related applications and shed some light on the question of the optimal architecture of a banking system.

Keywords: Banking sector development, economies in transition

JEL Classification: G21, G28, P23

Suggested Citation

Grigorian, David, Determinants of Commercial Bank Performance in Transition: An Application of Data Envelopment Analysis (September 2002). IMF Working Paper, Vol. , pp. 1-29, 2002. Available at SSRN: https://ssrn.com/abstract=879951

David A. Grigorian (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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