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    A novel MIMIC-style model of European bank technical efficiency and productivity growth

    Izzeldin, M. and Mamatzakis, Emmanuel and Murphy, A. and Tsionas, M. (2020) A novel MIMIC-style model of European bank technical efficiency and productivity growth. Working Paper. Federal Reserve Bank of Dallas, Dallas, U.S..

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    Abstract

    Using Bayesian Monte Carlo methods, we augment a stochastic distance function measure of bank efficiency and productivity growth with indicators of capitalization, return and risk. Our novel Multiple Indicator-Multiple Cause (MIMIC) style model generates more precise estimates of policy relevant parameters such as returns to scale, technical inefficiency, and productivity growth. We find considerable variation in the performance of EU-15 banks over the period 2008-2015. For the vast majority of banks, productivity growth – the sum of efficiency and technical changes - is negative, implying that the industry would benefit from innovation. We show that greater technical efficiency is associated with higher profitability, higher capital, a lower probability of default and lower return volatility.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: Working paper #2012
    Keyword(s) / Subject(s): Multiple Indicators-Multiple Causes (MIMIC), technical efficiency, productivity growth, EU banks
    School: Other
    Divisions > Other

    School of Business, Economics & Informatics > Management
    Research Centres and Institutes: Accounting and Finance Research Centre
    Depositing User: Emmanuel Mamatzakis
    Date Deposited: 16 Jul 2020 11:50
    Last Modified: 18 Jul 2020 04:42
    URI: https://eprints.bbk.ac.uk/id/eprint/32528

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