European Bank’s Performance and Efficiency

• Main Authors: Maria Elisabete Duarte Neves, Maria Do Castelo Gouveia, Catarina Alexandra Neves Proença
• Format: Article
• Language: English
• Published: MDPI AG 2020-04-01
• Series: Journal of Risk and Financial Management
• Subjects: determinants of bank performance; generalized method of moments; value-based DEA; multi-criteria decision aiding
• Online Access: https://www.mdpi.com/1911-8074/13/4/67

The research interest in bank profitability and efficiency is linked to the economic situation and an important issue for policymakers is to ensure economic stability. Nevertheless, managerial decisions and the environment could play a critical role in ensuring proper and efficient allocation of the resources. The purpose of this study is to understand which are the main factors that can influence the performance and efficiency of 94 commercial listed banks from Eurozone countries through a dynamic evaluation, in the period between 2011 and 2016. To achieve this aim, the generalized method of moments estimator technique is used to analyze the influence of some bank-specific characteristics, controlled by management, on the profitability as a measure of bank performance. After that, through the value-based data envelopment analysis (DEA) methodology, those factors are considered in determining the efficient banks. The results show that banking efficiency depends on set bank-specific characteristics and that the effect of determinants on efficiency differs, considering the macroeconomic conditions.