Abstract

The aim of the paper is to estimate the cost efficiency of the Czech and Slovak commercial banks within the period 2010-2014. For empirical analysis the Data Envelopment Analysis input-oriented model with variable returns to scale is applied on the data of the commercial banks. The intermediation approach is adopted to define the inputs and outputs. The Czech commercial banks are more cost efficient than Slovak commercial banks. The development of average cost efficiency is similar in the Czech and Slovak banking industry. The most efficient Czech banks are Ceská sporitelna and Sberbank in the Czech banking sector, the most efficient Slovak bank is Privatbanka with 100% efficiency.

Highlights

  • The examination of banking efficiency has fueled a large body of literature globally, and is of vital importance from both a microeconomic and a macroeconomic point of view (Berger, Mester 1997)

  • This study found that average cost efficiency was higher in the Czech banking sector in Slovak banking sector

  • This results confirm the results of Kočišová (2014) who found that the Czech banks were more cost efficient the Slovak banks within 2009–2013

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Summary

Introduction

The examination of banking efficiency has fueled a large body of literature globally, and is of vital importance from both a microeconomic and a macroeconomic point of view (Berger, Mester 1997). The aim of the paper is to estimate the cost efficiency of the Czech and Slovak commercial banks within the period 2010–2014. Two major approaches are used in empirical literature, the parametric and non-parametric. Stavárek and Polouček (2004) stated that both approaches use different techniques to envelop a data set with different assumptions for random noise and for the structure of production technology. These assumptions generate the strengths and drawbacks of both approaches that can be grouped under two categories. We estimate the cost efficiency using the nonparametric approach, namely the Data Envelopment Analysis

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