On the determinants of banking efficiency in four new European Union Member States: the impact of structural reforms

Abstract

We employ the stochastic frontier methodology and estimate alternative profit efficiency in the banking industry of four new European Union Member States, namely the Czech Republic, Hungary, Poland and the Slovak Republic, over the period 1999-2003. Our results show that structural reforms in the banking industry improve performance in terms of higher efficiency, whereas the institutional development of the non-bank financial sector hinders banks’ profit efficiency.structural reforms; alternative profit inefficiency, new EU countries