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Does regulation in credit, labour and business matter for bank performance in the EU-10 economies?
journal contribution
posted on 2023-06-15, 14:50 authored by Emmanuel MamatzakisCost 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.
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- Published
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- Published version
Journal
International Journal of the Economics of BusinessISSN
1357-1516Publisher
Taylor & FrancisExternal DOI
Issue
3Volume
20Page range
341-385Department affiliated with
- Business and Management Publications
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- No
Peer reviewed?
- Yes
Legacy Posted Date
2014-03-12First Compliant Deposit (FCD) Date
2014-03-12Usage metrics
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