Impact of the Great Recession on the European banking sector: The stochastic frontier approach

• Thesis title in Czech: Dopady Velké recese na bankovní sektor eurozóny: Stochastická analýza produkční hranice
• Thesis title in English: Impact of the Great Recession on the European banking sector: The stochastic frontier approach
• Key words: Nákladová účinnost, Eurozóna, Analýza Stochastické Hranice, Krize
• English key words: Cost Efficiency, Eurozone, Stochastic Frontier Analysis, Crisis
• Academic year of topic announcement: 2010/2011
• Type of assignment: Bachelor's thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: doc. PhDr. Zuzana Havránková, Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 06.11.2010
• Date of assignment: 11.03.2011
• Date and time of defence: 20.06.2012 00:00
• Venue of defence: Opletalova 26
• Date of electronic submission: 13.05.2012
• Date of proceeded defence: 20.06.2012
• Reviewers: prof. PhDr. Tomáš Havránek, Ph.D.

References

Kumbhakar, S. C. & A. Lozano-Vivas.: Stochastic Frontier Analysis. Cambridge University Press (2003).

Aigner, D., Lovell, C.A. & Schmidt, P.: Formulation and estimation of stochastic frontier production function models. Journal of econometrics 6, 21–37 (1977).

Demirgüç-Kunt, A., Detragiache, E. & Gupta, P.: Inside the crisis: An empirical analysis of banking systems in distress. Journal of International Money and Finance 25, 702–718 (2006).

Girardone, C., Molyneux, P. & Gardener, E. P.: Analysing the determinants of bank efficiency: the case of Italian banks. Applied Economics 36, 215–227 (2004).

Rhoades, S.A.: The efficiency effects of bank mergers: An overview of case studies of nine mergers. Journal of Banking & Finance 22, 273–291 (1998).

Vander Vennet, R.: Cost and Profit Efficiency of Financial Conglomerates and Universal Banks in Europe. Journal of Money, Credit and Banking 34(1), 254–82 (2002).

Preliminary scope of work in English

The contagious e�ffect of the US subprime mortgage crisis has dealt a hard lesson to the bank sectors of many countries all around the world. Even the eurozone, believed to have a strong and competitive banking, has been severely hit, with a diverse fi�nancial impact on di�fferent eurozone members. The goal of this study is to clarify the heterogeneity behind the response of involved countries banking systems toward the Great Recession, to discuss their institutional background and possible e�fficiency determinants that played a signi�cant role in the European banking, while coping with a fi�nancial problems. In this thesis, we will focus on the economic effi�ciency of the eurozone banking using the stochastic frontier approach. It is an econometric method that is believed to provide an objective numerical value and ranking of fi�rms. To our present knowledge, there is no other study with a complex discussion on the eurozone banking effi�ciency during the 2008-2010 fi�nancial crisis. This paper investigates an e�fficiency of the eurozone bank sector before the crisis of 2008 - 2010 and a subsequent impact the crisis had on its effi�ciency. The main aim is to �find the features of bank sector positively correlated with effi�ciency. First of all, we will describe the eurozone bank sector, its history and position in which it has entered the fi�nancial crisis. In part two, we will calculate e�fficiencies using the stochastic frontier analysis. Obtained effi�ciency values will be further used to �find the possible determinants of bank e�fficiency and the features of the most e�ffective banks. As a last point we will compare obtained values from the eurozone with Czech banking. The point is to �find implications of monetary policy to bank e�fficiency.