Title

Privatization, Foreign Bank Entry And Bank Efficiency In Croatia: A Fourier-Flexible Function Stochastic Cost Frontier Analysis

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.

Publication Date

9-20-2006

Publication Title

Applied Economics

Volume

38

Issue

17

Number of Pages

2075-2088

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1080/00036840500427361

Socpus ID

33749010601 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/33749010601

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