Banks’ efficiency in crisis

What is it about?

This study focuses on the efficiency measures of banking institutions from sixteen Eastern European countries, the Balkans and Turkey. Authors use a two-step approach to study the efficiency of banks at the regional level during the critical period 2007-2011. First, the study examines whether banks are actively operating differently at a regional level during the under-review period to focus on the development of the crisis. Secondly, authors use the performance measure (Technical Efficiency -TM) that was obtained from the analysis using basic banking accounting characteristics such as capital ratios, assets quality, leverage, liquidity, and operations financial ratio as independent variables. It is also used Global Governance Indicators to describe the ability of the respective governments to formulate effectively and properly policies related to Political Stability and the Rule of Law. Their results suggest that bank accountant and managers of all regions should focus upon profit efficiency, proper capitalization, in order to increase their banks’ profitability.

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Why is it important?

It underscores the need for a benchmark in lowering Banks’ operating expenses, in order for them to become more efficient.

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