Environmental determinants of banking efficiency in Austria |
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Authors: | Franz R Hahn |
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Institution: | (1) Austrian Institute of Economic Research, P.O. Box 91, 1103, Vienna, Austria |
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Abstract: | 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.
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Keywords: | Efficiency measurement Data envelopment analysis Slack adjustment Environmental variables Banking |
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