<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Foreign and larger banks in Croatia are generally considered to be more cost efficient compared with domestic and smaller banks. However, those views are often based on data from financial statements that can be misleading due to simultaneous consolidation process on the market and the existence of economies of scale. To contribute to the Croatian banking efficiency literature, we construct a panel of individual bank data for 1994-2014 period and conduct a frontier analysis to calculate bank specific X-efficiency. Our results suggest that efficiency scores depend on the cost definition as domestic and smaller banks are more efficient in managing administrative costs compared with foreign and larger banks but equally efficient in managing total costs. Results indicate that average bank relative efficiency increased on two occasions: one in the late 90s in the period of banking crisis and subsequent “market cleansing” and to a lesser extent in the period marked with financial crisis. Although the differences between bank cost efficiencies seem small, we conclude that the area is worth further research as significant gains in bank earnings could be achieved by increasing efficiency.</p></abstract>

Foreign and larger banks in Croatia are generally considered to be more cost efficient compared with domestic and smaller banks. However, those views are often based on data from financial statements that can be misleading due to simultaneous consolidation process on the market and the existence of economies of scale. To contribute to the Croatian banking efficiency literature, we construct a panel of individual bank data for 1994-2014 period and conduct a frontier analysis to calculate bank specific X-efficiency. Our results suggest that efficiency scores depend on the cost definition as domestic and smaller banks are more efficient in managing administrative costs compared with foreign and larger banks but equally efficient in managing total costs. Results indicate that average bank relative efficiency increased on two occasions: one in the late 90s in the period of banking crisis and subsequent “market cleansing” and to a lesser extent in the period marked with financial crisis. Although the differences between bank cost efficiencies seem small, we conclude that the area is worth further research as significant gains in bank earnings could be achieved by increasing efficiency.

Cost Efficiency of Banks in Croatia

Croatian Review of Economic, Business and Social Statistics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Cost Efficiency of Banks in Croatia"}

Foreign and larger banks in Croatia are generally considered to be more cost efficient compared with domestic and smaller banks. However, those views are often...

Cost Efficiency of Banks in Croatia

Publié en ligne: 17 oct. 2016

Pages: 12 - 26

Reçu: 15 oct. 2015

Accepté: 02 déc. 2015

DOI: https://doi.org/10.1515/crebss-2016-0002

Mots clés
Croatia, banks, cost efficiency

© 2015 Ivan Huljak, published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Cost Efficiency of Banks in Croatia

Publié en ligne: 17 oct. 2016

Pages: 12 - 26

Reçu: 15 oct. 2015

Accepté: 02 déc. 2015

DOI: https://doi.org/10.1515/crebss-2016-0002

Mots clésCroatia, banks, cost efficiency

© 2015 Ivan Huljak, published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Mots clés
Croatia, banks, cost efficiency