Efficiency of transition banks : inter-country banking industry trends

This study investigates the trend of X-(in) efficiencies across Eastern European 2004-accession countries' banking industries over the period 1999 to 2003. We use Data Envelopment Analysis (DEA) estimators to obtain proxies for X-(in)efficiencies and we then analyse the inter-country industry differences using the methodology of Simar and Zelenyuk (2007) and the impact of country-specific environmental conditions, following Simar and Wilson's (2007) truncated regression with bootstrap methodology. Overall, the results suggest that Eastern European banking had considerable scope for X-efficiency improvements. However, the results also demonstrate that the efficiency gap between the sample countries declined over the period, and fewer environmental factors contributed to the difference in the banking efficiency levels.