Privatization, foreign bank entry and bank efficiency in Croatia: a Fourier-flexible function stochastic cost frontier analysis

    Authors

    E. Kraft; R. Hofler;J. Payne

    Comments

    Authors: contact us about adding a copy of your work at STARS@ucf.edu

    Abbreviated Journal Title

    Appl. Econ.

    Keywords

    COMMERCIAL-BANKS; TRANSITION; OWNERSHIP; ECONOMIES; SCALE; COUNTRIES; SCOPE; FORM; Economics

    Abstract

    Using bank balance sheet data for Croatia for 1994 to 2000, this study estimates a Fourier-flexible frontier cost function. Specification tests indicate that the stochastic frontier model with a Fourier-flexible form with a truncated normal distribution of the inefficiency term allowing for time varying cost efficiency is preferred. The results show that new private and privatized banks, contrary to some expectations, are not the most efficient banks through most of the period. Privatization also does not seem to have an immediate effect on improved efficiency. However, better cost efficiency is associated with a lower likelihood of failure, suggesting that better risk management and better cost management are signs of better management in general. Finally, foreign banks have substantially better efficiency scores than all categories of domestic banks.

    Journal Title

    Applied Economics

    Volume

    38

    Issue/Number

    17

    Publication Date

    1-1-2006

    Document Type

    Article

    Language

    English

    First Page

    2075

    Last Page

    2088

    WOS Identifier

    WOS:000240952200009

    ISSN

    0003-6846

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