How output diversification affects bnak efficiency and risk: an intra-EU comparison study

Papanikolaou, Nikolaos

Reference : How output diversification affects bnak efficiency and risk: an intra-EU comparison study


	Document type :	Parts of books : Contribution to collective works
	Discipline(s) :	Business & economic sciences : Finance
	To cite this reference:	http://hdl.handle.net/10993/5702

Title :	How output diversification affects bnak efficiency and risk: an intra-EU comparison study
Language :	English
Author, co-author :	Papanikolaou, Nikolaos [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Luxembourg School of Finance (LSF)]
Publication date :	2009
Edition :	1st
Main document title :	Productivity in the Financial Services Sector
Editor :	Balling, Morten
	Gnan, Ernest
	Lierman, Frank
	Schoder, Jean-Pierre
Publisher :	Larcier
Collection and collection volume :	The European Money and Finance Forum (SUERF) Studies 2009/4
Pages :	245-273
Peer reviewed :	Yes
ISBN :	978-3-902109-49-1
City :	Brussels
Country :	BELGIUM
Keywords :	[en] Product diversification ; Bank efficiency ; Risk-taking ; EU banking
Abstract :	[en] This paper examines how banks have been diversifying away from traditional financial intermediation activity into noninterest income business and how this shift has affected their efficiency and risk-taking behaviour. To this end, we construct a global best-practice efficiency frontier following the Stochastic Frontier Approach and relying on the technique of Battese and Coelli (1995), which permits the estimation of the frontier and of the coefficients of efficiency variables in a single-stage. We opt for an application of this model to the EU-27 countries performing an intra-Union comparison between the old and the new EU members that provides us with substantial information concerning the level of harmonization of the European banking systems. Results indicate that the diversification of bank output enlarges efficiency margins in both cost and profit terms without altering the way banks treat risk. Also, environment identically affects the performance of European banks. By and large, both old and new EU member states follow similar behavioural patterns that are not influenced by product diversification, which reveals a rather harmonized European banking market.
Target :	Researchers ; Professionals ; Students
Permalink :	http://hdl.handle.net/10993/5702
Other URL :	http://www.suerf.org/index.php?option=com_k2&view=item&id=108:2009-4&Itemid=133

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