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COST EFFICIENCY IN GREEK BANKING

Nicos C. Kamberoglou

Bank of Greece, Statistics Department

Elias Liapis

Bank of Greece, Economic Research Department

George T. Simigiannis

Bank of Greece, Statistics Department

Panagiota Tzamourani

Bank of Greece, Statistics Department

ABSTRACT

This study uses the distribution free approach to investigate cost efficiency in a panel of Greek banks over 1993-1999, a period characterized by major changes in the banking sector brought about by gradual financial deregulation. These reforms were supposed to provide an opportunity to Greek banks to improve their efficiency and to enhance their competitiveness in view of ongoing financial integration in Europe and the introduction of the euro. The results obtained indicate that important cost X-inefficiencies are in place. Some evidence is provided that bank characteristics such as bank size, type of ownership and risk behaviour do play a role in explaining differences in measured inefficiencies. Scale economies are also examined and the findings indicate that the Greek banking industry experiences economies of scale, though they have declined throughout the observed period. This suggests that competitive viability may be an important factor for further consolidation in the Greek banking industry.

Keywords: X-efficiency, scale economies, panel data

JEL classification: C33, G21, G28

The authors wish to thank Heather Gibson and Martin Knott for helpful comments. The views expressed are those of the authors and do not necessarily reflect those of the Bank of Greece.

Correspondence:

Nicos C. Kamberoglou,
Statistics Department,
Bank of Greece, 21 E. Venizelos Av.,
102 50 Athens, Greece,
Tel. + 30 210 3202360, Fax +30 210 3233025
Email: nkamberoglou@bankofgreece.gr


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