Environmental determinants of banking efficiency in Austria

The great majority of Austrian banks operate on a regional or local basis and only a few banks provide their services on a national or even international scale. Obviously, the market environments regional or local banks face are different from that of nationwide operating banks. Casual evidence sugg...

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Bibliographic Details
Published in:Empirica 2007-07, Vol.34 (3), p.231-245
Main Author: Hahn, Franz Rudolf
Format: Article
Language:English
Subjects:
Austria
Bank management
Bank operations
Banking
Banking industry
Banking system
Bootstrap method
C23
C52
Data envelopment analysis
Decision making
Economic efficiency
Efficiency
Efficiency measurement
Environmental variables
Estimating techniques
F36
G21
G24
G34
Local finance
Measurement
Regression analysis
Slack adjustment
Studies
Variables
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Summary:The great majority of Austrian banks operate on a regional or local basis and only a few banks provide their services on a national or even international scale. Obviously, the market environments regional or local banks face are different from that of nationwide operating banks. Casual evidence suggests that local markets condition is a very important external determinant of banking efficiency. Thus, not controlling for market conditions may substantially bias the measurement of managerial efficiency particularly of locally operating banks. In this paper we assess the internal technical efficiency (or X-efficiency) of the Austrian banking sector with the focus on environmental and non-controllable factors critical to banking markets. Analytically, we apply a multiple-stage approach based on a slacks-based DEA model (SBM) and a censored regression model, respectively. In order to cope with the inherent dependency problem of DEA-based efficiency analysis when incorporated into regression analysis we apply a Bootstrap estimator. In so doing we attempt to overcome the dependency problem which plagues the power of standard regression analysis based on DEA processed data. The empirical analysis is based on an unbalanced panel of data covering more than 800 Austrian banks ranging over 1995-2002. [PUBLICATION ABSTRACT]
ISSN:0340-8744
1573-6911
DOI:10.1007/s10663-007-9039-y