Are Italian mutual banks efficient? Evidence from two different cost frontier techniques

The aim of this paper is to analyze the efficiency of co-operative banks in Italy. The increasing competition induced by the ongoing process of liberalization in Europe has been affecting also these small financial institutions that used to operate in a more protected environment. Based on a panel of about 450 banks covering the period 1995-99, we employ two different techniques: nonparametric frontier analysis, and parametric frontier analysis. By means of this analysis it is possible to compare the results obtained using these two methodologies and analyze the determinants of bank inefficiency.