The performance of the Greek banking system in view of the EMU: results from a non-parametric approach

Abstract

This paper estimates economic efficiency, TFP change, and technical change of the Greek banking system over the period 1993–1998. The beginning of the examination period coincides with the acceleration of liberalization and deregulation of the Greek financial system, in view of the country joining the EMU. The study uses Data Envelopment Analysis to measure technical and allocative efficiency. Also, productivity change is computed using the Malmquist Total Factor Productivity approach and is composed of technical and efficiency changes. The results show that the majority of the Greek banks operate close to best market practices, while allocative inefficiency costs seem to be more important than technical inefficiency costs. Also, the positive but not substantial TFP change of the Greek banking system is associated to efficiency improvement for the medium-sized banks and to technical change improvement for larger institutions.