Efficiency in banking: does the choice of inputs and outputs matter?

Christos Floros, Constantin Zopounidis, Yong Tan, Christos Lemonakis, Alexandros Garefalakis, Efthalia Tabouratzi

Research output: Contribution to journalArticle

Abstract

This paper examines banking efficiency using recent data from PIGS countries (i.e., Portugal, Italy, Greece and Spain), which suffer from debt problems. We employ a two-stage approach based on the effect of several items of balance sheets on cash flows and data envelopment analysis (DEA). More specifically, we extend previous studies by giving attention to the deposit dilemma. The reported results show that the choice of inputs and outputs does matter in the case of European banking efficiency. Although the role of deposits is controversial, we find that deposits may be an output variable, owing to liquidity issues that play a major role in the efficiency of PIGS' banking sector. We also report that the DEA model with deposits as an output variable generates efficiency scores that fall between periods. These results are helpful to bank managers and financial analysts dealing with efficiency modelling.

Original languageEnglish
Pages (from-to)129-148
Number of pages20
JournalInternational Journal of Computational Economics and Econometrics
Volume10
Issue number2
Early online date14 May 2020
DOIs
Publication statusPublished - 1 Jun 2020

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