Bank productivity growth and convergence in the European Union during the financial crisis

Marta Degl’Innocenti (Lead / Corresponding author), Stavros Kourtzidis, Zeljko Sevic, Nickolaos Tzeremes

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    Abstract

    This paper examines the bank productivity growth and integration process for the 28 EU countries during three main phases of the financial crisis: the U.S. subprime crisis (2007–2008), the global financial crisis (2009–2010) and the sovereign debt crisis (2010–2012). We extend the Malmquist Productivity Index by applying an additive two-stage DEA model. This allows us to explore the sources of growth in different stages of production. Furthermore, we assess the integration of European banks by analyzing the β-convergence and σ-convergence of the two-stage Productivity Index. Our results show a productivity growth during the U.S. subprime crisis, but a consistent decline during the global financial crisis. The loss of competitiveness of the European banking system is due to the drop in growth of the performance stage and technical change. Finally, we find a strong convergence pattern during the financial crisis, mainly driven by the catch up process of some Eastern countries and the drop in performance of Western countries.
    Original languageEnglish
    Pages (from-to)184-199
    Number of pages16
    JournalJournal of Banking and Finance
    Volume75
    Early online date15 Nov 2016
    DOIs
    Publication statusPublished - Feb 2017

    Keywords

    • Banking
    • European Union
    • Data envelopment analysis
    • Two-stage
    • Productivity growth
    • Convergence

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