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Productivity Drivers of Efficiency in Banking: Importance of Model Specifications

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Abstract
We use nonparametric method with various specifications to estimate efficiency of banks and then use truncated regression with double-bootstrap (Simar and Wilson, 2007) to analyze how various bank-specific factors explain the differences in the estimated levels of inefficiency across the banks in Ukraine, with a particular focus on foreign ownership. We show that some results are very robust, yet others depend on the chosen Data Envelopment Analysis specification for the efficiency model. We also find that the efficiency of banks with foreign ownership is not distinguishable from the efficiency of the locally-owned banks if the degree of ownership control is not accounted for. On the other hand, when we account for degree of control, we find evidence that banks that were 100% foreign-owned were significantly more efficient than the locally owned banks, while the partially foreign-owned banks were significantly less efficient than the locally owned banks (on average and ceteris paribus), thus providing empirical support for the agency and corporate governance theories in economics.

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  • Natalya Zelenyuk & Valentin Zelenyuk, 2015. "Productivity Drivers of Efficiency in Banking: Importance of Model Specifications," CEPA Working Papers Series WP082015, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uqcepa:106
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    File URL: https://economics.uq.edu.au/files/5097/WP082015.pdf
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    Cited by:

    1. Kai Du & Andrew C. Worthington & Valentin Zelenyuk, 2015. "The dynamic relationship between bank asset diversification and efficiency: Evidence from the Chinese banking sector," CEPA Working Papers Series WP122015, School of Economics, University of Queensland, Australia.
    2. Esso-Hanam Atake, 2017. "Sustaining Gains in Health Programs: Technical Efficiency and its Determinants in Malaria Programs in Sub-Saharan Africa," Applied Health Economics and Health Policy, Springer, vol. 15(2), pages 249-259, April.
    3. Worthington, Andrew C. & Zelenyuk, Valentin, 2018. "Data envelopment analysis, truncated regression and double-bootstrap for panel data with application to Chinese bankingAuthor-Name: Du, Kai," European Journal of Operational Research, Elsevier, vol. 265(2), pages 748-764.
    4. Chowdhury, Hedayet & Zelenyuk, Valentin, 2016. "Performance of hospital services in Ontario: DEA with truncated regression approach," Omega, Elsevier, vol. 63(C), pages 111-122.
    5. Manh D. Pham & Valentin Zelenyuk, 2018. "Slack-based directional distance function in the presence of bad outputs: theory and application to Vietnamese banking," Empirical Economics, Springer, vol. 54(1), pages 153-187, February.
    6. Abdus Samad & Mohammad Ashraful Ferdous Chowdhury, 2019. "Comparative Bootstrap DEA Technical Efficiencies and Determinant Factors: Evidence From the Islamic Banks of Bahrain and United Arab Emirates," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 291-308, December.

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    More about this item

    Keywords

    Foreign ownership; Banking; Efficiency; DEA; Truncated regression; Double-bootstrap;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G2 - Financial Economics - - Financial Institutions and Services

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