Transformations  in
Business & Economics

MODELLING BANK EFFICIENCY OF THE NEW EU MEMBER STATES: A NON-PARAMETRIC FRONTIER APPROACH
Angela Roman, Alina Camelia Sargu

ABSTRACT. The European integration process and the development of innovative financial products and services have had a tremendous impact on the efficiency of European banks, especially in the case of the new EU member countries in the last two decades. In this context, the aim of our research is to investigate if the evolution of the technical efficiency of the banks from a sample of new EU member countries (two from the first wave of EU enlargement, namely the Czech Republic and Hungary and one from the second wave, namely Romania) is determined by a series of factors, such as profitability, the bank size or the foreign ownership structure. In order to achieve this we have applied a two-stage non-parametric approach, where the estimated efficiencies obtained through the Data Envelopment Analysis in the first stage, have been used in the second stage as dependable variables in a Tobit regression. The obtained results suggest that the banks efficiency in the case of the analysed countries has registered a slight increase during the analysed period (2003-2010), the Czech Republic banks being the best performers, followed by the banks from Hungary and Romania. From a policy perspective, the paper highlights the importance of encouraging increased efficiency throughout the banking industry of the new EU member states.

KEYWORDS: banking sector, technical efficiency, two-stage DEA, Tobit model.

JEL classification: G21, C14, C33.