Abstract
<p>Theoretical background: The relationship between the size of banks and their efficiency has become an important subject for academics and policy makers in the recent decades. However, the outcomes of these studies are relatively divergent concerning the direction of this dependence.</p><p>Purpose of the article: The goal of this study is to assess how the size of banks affects their efficiency in the CEE countries in the years 2005–2017. Additionally, the relationship between the market concentration and banks efficiency is checked.</p><p>Research methods: The research covers 108 banks operating in eleven CEE countries. The efficiency scores are achieved through the SFA method and regressed with the individual bank characteristics and macroeconomic and sectoral variables.</p><p>Main findings: The results show that growing bank’s size and market share positively affect its efficiency. Additionally, higher concentration of the banking market has a similar effect. Higher inflation and GDP per capita decrease bank profit efficiency which can indicate that banks achieve the highest efficiency gains in less prosperous countries, however, in the low inflation environment. Additionally, banks’ efficiency is boosted with the growing development of the banking sector and increasing lending to the economy. Fast-growing banks tend to be more efficient, probably due to the positive effect of the fiancial leverage on profits.</p>
Highlights
The efficiency of the banking sector has become an important subject for academics and policy makers in the recent decades (Berger, Hasan, & Zhou, 2009; Duygun, Sena, & Shaban, 2013; Mesa, Sánchez, & Sobrino, 2014; Niţoi & Spulbar, 2015; Silva, Guerra, Tabak, & de Castro Miranda, 2016; Peng, Jeng, Wang, & Chen, 2017; Avramidis, Cabolis, & Serfes, 2018)
Results of the research conducted by Evanoff and Fortier (1988) on the U.S banking sector in the 1970s and 1980s indicate that more efficient banks acquire less competitive entities, inter alia, based on their size and cost reduction ability
Among them Andries and Ursu (2016), based on the research on banks operating in seven Central Eastern European (CEE) countries over the period of 2004–2008, find that banks’ efficiency characterises in an upward trend and is positively affected by the level of banking sector concentration and the size of banks
Summary
The efficiency of the banking sector has become an important subject for academics and policy makers in the recent decades (Berger, Hasan, & Zhou, 2009; Duygun, Sena, & Shaban, 2013; Mesa, Sánchez, & Sobrino, 2014; Niţoi & Spulbar, 2015; Silva, Guerra, Tabak, & de Castro Miranda, 2016; Peng, Jeng, Wang, & Chen, 2017; Avramidis, Cabolis, & Serfes, 2018). Studies analyze the relationship between the size of banks and their efficiency. Some of them indicate that the size of banks positively impacts their performance C the assessment of the possible impact of the concentration of the banking structure. The difference in the obtained conclusions may come from the fact that these studies were conducted in various macroeconomic conditions and timeframes, as well as sets of examined banks operating in different geographical regions
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