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Does regulation in credit, labour and business matter for bank performance in the EU-10 economies?

Does regulation in credit, labour and business matter for bank performance in the EU-10 economies?

Kalyvas, Nikolaos Antonios, Mamatzakis, Emmanuel and Piesse, Jenifer (2013) Does regulation in credit, labour and business matter for bank performance in the EU-10 economies? International Journal of the Economics of Business, 20 (3). pp. 341-385. ISSN 1357-1516 (Print), 1466-1829 (Online) (doi:https://doi.org/10.1080/13571516.2013.835981)

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Abstract

Cost efficiency scores for banks in ten new EU member countries of Central and Eastern Europe are estimated using a parametric approach (data envelopment analysis) for the period prior to and immediately following their accession (2000–2010). These are then used in both fixed effects and dynamic panels to estimate the impact of regulation on bank specific efficiency in the transition economies of the EU. Using the Fraser Index of Economic Freedom (Gwartney, Hall, and Lawson 2012) we find that, among all the indices of economic freedom, the composite regulation index that includes regulation in credit, labour and business has more importance for the banking sector as results suggest a positive and statistically significant impact on bank efficiency. By decomposing the regulation index into its three components (credit, business and labour regulation) we find that strict labour regulation is associated with lower bank cost efficiency while certain aspects of credit regulation such as foreign ownership and competition as well as private ownership are significantly associated with improved efficiency. The dynamic panel vector autoregression (VAR) results using impulse response functions and variance decomposition further support the validity of these results. These findings are valuable for both academics and policy makers in their attempts to understand the drivers of bank efficiency.

Item Type: Article
Uncontrolled Keywords: Regulation, Bank Cost Efficiency, New EU Member States
Faculty / Department / Research Group: Faculty of Business > Department of Accounting & Finance
Last Modified: 14 Oct 2016 09:37
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
URI: http://gala.gre.ac.uk/id/eprint/14827

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