Banking Sector in the Process of European Integration : How Did EU Accession and Euro Adoption Affect Cost Efficiency of Slovak Banking Sector?

The aim of this paper is to examine the influence of the accession of Slovakia to the European Union and the Euro zone (Euro area) on the efficiency of Slovak banks. We use data envelopment analysis to estimate bank efficiency, and ordinary least squares and tobit regression to estimate influence of possible bank efficiency determinants. Our analysis shows that the bank efficiency increases both after the accession of Slovakia to the European Union and the Euro zone. We find that the adoption of the Euro has positive impact on bank efficiency in the longer run, although it can have short term negative impact. Our results suggest that efficiency of Slovak banks was not affected by macroeconomic conditions and banking reforms, which is in line with the argument that Slovak banking sector is in the advanced stage of development when influence of these factors is of less importance. We also find that large banks are more efficient than small banks, and foreign banks are more efficient than domestic banks