TECHNICAL EFFICIENCY OF TOP 50 WORLD BANKS
TECHNICAL EFFICIENCY OF TOP 50 WORLD BANKS

Summary/Abstract: This study investigated the relative technical efficiency of top 50 world banks in 2011. In particular, the overall technical efficiency, pure technical efficiency and scale inefficiency were estimated and the reasons of inefficiency were defined. We distinguished three main approaches in evaluating efficiency: production, intermediation and operational approach to find out, which banks were the most efficient. The average efficiency scores were evaluated separately on the “national” and “international” level. In case of “international” approach the average efficiency scores were calculated from data of all 50 banks. If “national” approach was applied the average efficiency scores were calculated from data of banks in four regions, determined by the world´s continents (America, Asia, Australia, and Europe). The study concludes that almost all banks reported lower intermediation efficiency than the operating efficiency; the production efficiency was the lowest one. The results suggest that American and European banks were less efficient than Asian and Australian, which may be due to lingering financial crisis, which affected mainly the American and European financial market. In this study we also investigated the interaction between efficiency and other bank specific variables like total assets, indicators of profitability, intermediation ratio, etc. The results suggest that variables total assets and loan to deposit ratio were significantly positively, and variable cost to income ratio was significantly negatively related to the pure technical efficiency.

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