A STOCHASTIC FRONTIER ANALYSIS OF UKRAINIAN BANKS EFFICIENCY
Keywords:
cost efficiency, trans-logarithmic function, profit efficiency, intermediation approach, production approach, Stochastic Frontier Analysis.
Abstract
The authors have developed a model for assessing the Ukrainian banks cost efficiency by means of Stochastic Frontier Analysis, in which the banks are considered as financial intermediaries. On the basis of the likelihood ratio test results the trans-logarithmic function steps forward in the role of the bank’s cost function. In the role of input variables we used the value of fixed assets, the price of labor and price of loanable fund, in the role of output − total loans, other assets and total cost.
References
Aikaterini, K. (2010). Estimating technical inefficiency: an empirical approach to EU industries. Regional Science Inquiry Journal, Vol. II (2), 95-104. [in English].
Altunbas, Y., Liu, M., Molyneux, P., Rama, S. (2000). Efficiency and risk in Japanese banking. Journal of Banking and Finance, No. 24, 1605–1628. [in English].
Berger, A. N., & Mester, L. J. (1997). Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions? Journal of Banking and Finance, No. 21, 895-947. [in English].
Coelli, T. J. (1986). A Guide to FRONTIER Version 4.1: A Computer Program for Stochastic Frontier Production and Cost Function Estimation, CEPA Working Paper. Department of Econometrics, University of New England, Armidale, 7/96.
[Electronic resource]. Retrieved from http://www.uq.edu.au/economics/cepa/frontier.php. [in English].
Dong,Y., Hamilton, R., & Tippett, M. J. (2014). Cost Efficiency of the Chinese Banking Sector: A Comparison of Stochastic Frontier Analysis and Data Envelopment Analysis. Economic Modelling, 36, 298–308. [Electronic resource]. Retrieved from https://www.sciencedirect.com/science/article/pii/S0264999313004021?via%3Dihub. DOI: 10.1016/j.econmod.2013.09.042. [in English].
Ferrier, G. D., & Lovell, A. K. (1990). Measuring Cost Efficiency in Banking: Econometric and Linear Programming Evidence. Journal of Econometrics, No. 46, 229–245. [in English].
Fiorentino, E., Karmann, A., Koetter, M. (2006).The cost efficiency of German banks: a comparison of SFA and DEA. Discussion Paper Series 2: Banking and Financial Studies. Deutsche Bundesbank, No. 10. [in English].
Hardy, D. C., & Bonaccorsi, di Patti E. (2005). Financial sector liberalization, bank privatization, and efficiency: Evidence from Pakistan. Journal of Banking & Finance, 29 (8), 2381-2406. [in English].
Hughes, J. P., Mester, L. J. (2008). Efficiency in banking: theory, practice, and evidence. Federal Reserve Bank of Philadelphia, Working Paper, No. 08-1. [Electronic resource]. Retrieved from http://ideas.repec.org/p/fip/fedpwp/08-1.html. [in English].
Iza, M. T., Mazlin,a A. B., Haron, S. (2009). Evaluating efficiency of Malaysian banks using Data Envelopment Analysis. Int. J. Bus. Manage, 4(8), 96-106. [in English].
Khailuk, S. O. (2014). An assessment of the bank efficiency. Financial and credit activity: problems of theory and practice, Vol. 1, No. 8, 112-118. Retrieved from: http://fkd.org.ua/article/view/29510/26466. [in Ukrainian].
Kodde, D. A., & Palm, F. C. (1986). Wald Criteria for Jointly Testing Equality and Inequality Restrictions. Econometrica, No. 54,1243-1248. [in English].
Kyshakevych, B. Y., & Mazharov, D. V. (2017). Application of SFA simulation to assess the effectiveness of banking. Eastern Europe: economy, business and management, 6 (11), 386-390. [in Ukrainian].
Kyshakevych, B. Y., Kubai, R. Y., & Mazharov, D. V. (2016). Effectiveness of banks: the economic essence and methods of evaluation. Scientific Herald of the International Humanitarian University, Series: Economics and Management. Collection of scientific works, 22, 200-204. [in Ukrainian].
Maslak, N. H., & Buriak, A. V. (2009). Methodical approaches to assessing the effectiveness of the bank. Businessinform, No. 12(2), 187-190. [in Russian].
Matthews, K. (2007). Banking efficiency in emerging market economies. Cardiff Economics Working Papers, No. E2010/12, 19. [in English].
NBU Official Site (n.d.). Bank System Indicators. [Data file]. [Electronic resource]. Retrieved from https://bank.gov.ua/control/uk/publish/category?cat_id=74208. [in Ukrainian].
Pilyavskyy, A., Matsiv, Y., & Vovchak, O. (2012). Cost efficiency of ukrainian banks. Does it make difference? Zeszyty Naukowe Wydziału Informatycznych Technik Zarządzania Wyższej Szkoły Informatyki Stosowanej i Zarządzania „Współczesne Problemy Zarządzania”, 1, 53-61. [in English].
Prykarpatskyi, A. K., Kyshakevych, B. Y., & Tverdokhlib, I. P. (2009). The analysis of optimal strategies of the portfolio competitive model of the stock market. Reports of the National Academy of Sciences of Ukraine, 1, 40-47. [in Ukrainian].
Resti, A. (1997). Evaluating the Cost Efficiency of the Italian Banking System: What can be learned from the Joint Application of Parametric and NonparametricTechniques. Journal of Banking & Finance, 21, 221–250. [in English].
Sana, K., Bilal, M., & Nisar, A. (2015). Cost Efficiency of Pakistani Banking Sector: A Stochastic Frontier Analysis. Journal of Commerce (22206043), Vol. 7, Issue 3, 110-126. [in English].
Sherman, H. D., & Gold, F. (1985). Bank branch operating efficiency: Evaluation with Data Envelopment Analysis. J Bank. Finan, 9(2), 297-315. [in English].
Altunbas, Y., Liu, M., Molyneux, P., Rama, S. (2000). Efficiency and risk in Japanese banking. Journal of Banking and Finance, No. 24, 1605–1628. [in English].
Berger, A. N., & Mester, L. J. (1997). Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions? Journal of Banking and Finance, No. 21, 895-947. [in English].
Coelli, T. J. (1986). A Guide to FRONTIER Version 4.1: A Computer Program for Stochastic Frontier Production and Cost Function Estimation, CEPA Working Paper. Department of Econometrics, University of New England, Armidale, 7/96.
[Electronic resource]. Retrieved from http://www.uq.edu.au/economics/cepa/frontier.php. [in English].
Dong,Y., Hamilton, R., & Tippett, M. J. (2014). Cost Efficiency of the Chinese Banking Sector: A Comparison of Stochastic Frontier Analysis and Data Envelopment Analysis. Economic Modelling, 36, 298–308. [Electronic resource]. Retrieved from https://www.sciencedirect.com/science/article/pii/S0264999313004021?via%3Dihub. DOI: 10.1016/j.econmod.2013.09.042. [in English].
Ferrier, G. D., & Lovell, A. K. (1990). Measuring Cost Efficiency in Banking: Econometric and Linear Programming Evidence. Journal of Econometrics, No. 46, 229–245. [in English].
Fiorentino, E., Karmann, A., Koetter, M. (2006).The cost efficiency of German banks: a comparison of SFA and DEA. Discussion Paper Series 2: Banking and Financial Studies. Deutsche Bundesbank, No. 10. [in English].
Hardy, D. C., & Bonaccorsi, di Patti E. (2005). Financial sector liberalization, bank privatization, and efficiency: Evidence from Pakistan. Journal of Banking & Finance, 29 (8), 2381-2406. [in English].
Hughes, J. P., Mester, L. J. (2008). Efficiency in banking: theory, practice, and evidence. Federal Reserve Bank of Philadelphia, Working Paper, No. 08-1. [Electronic resource]. Retrieved from http://ideas.repec.org/p/fip/fedpwp/08-1.html. [in English].
Iza, M. T., Mazlin,a A. B., Haron, S. (2009). Evaluating efficiency of Malaysian banks using Data Envelopment Analysis. Int. J. Bus. Manage, 4(8), 96-106. [in English].
Khailuk, S. O. (2014). An assessment of the bank efficiency. Financial and credit activity: problems of theory and practice, Vol. 1, No. 8, 112-118. Retrieved from: http://fkd.org.ua/article/view/29510/26466. [in Ukrainian].
Kodde, D. A., & Palm, F. C. (1986). Wald Criteria for Jointly Testing Equality and Inequality Restrictions. Econometrica, No. 54,1243-1248. [in English].
Kyshakevych, B. Y., & Mazharov, D. V. (2017). Application of SFA simulation to assess the effectiveness of banking. Eastern Europe: economy, business and management, 6 (11), 386-390. [in Ukrainian].
Kyshakevych, B. Y., Kubai, R. Y., & Mazharov, D. V. (2016). Effectiveness of banks: the economic essence and methods of evaluation. Scientific Herald of the International Humanitarian University, Series: Economics and Management. Collection of scientific works, 22, 200-204. [in Ukrainian].
Maslak, N. H., & Buriak, A. V. (2009). Methodical approaches to assessing the effectiveness of the bank. Businessinform, No. 12(2), 187-190. [in Russian].
Matthews, K. (2007). Banking efficiency in emerging market economies. Cardiff Economics Working Papers, No. E2010/12, 19. [in English].
NBU Official Site (n.d.). Bank System Indicators. [Data file]. [Electronic resource]. Retrieved from https://bank.gov.ua/control/uk/publish/category?cat_id=74208. [in Ukrainian].
Pilyavskyy, A., Matsiv, Y., & Vovchak, O. (2012). Cost efficiency of ukrainian banks. Does it make difference? Zeszyty Naukowe Wydziału Informatycznych Technik Zarządzania Wyższej Szkoły Informatyki Stosowanej i Zarządzania „Współczesne Problemy Zarządzania”, 1, 53-61. [in English].
Prykarpatskyi, A. K., Kyshakevych, B. Y., & Tverdokhlib, I. P. (2009). The analysis of optimal strategies of the portfolio competitive model of the stock market. Reports of the National Academy of Sciences of Ukraine, 1, 40-47. [in Ukrainian].
Resti, A. (1997). Evaluating the Cost Efficiency of the Italian Banking System: What can be learned from the Joint Application of Parametric and NonparametricTechniques. Journal of Banking & Finance, 21, 221–250. [in English].
Sana, K., Bilal, M., & Nisar, A. (2015). Cost Efficiency of Pakistani Banking Sector: A Stochastic Frontier Analysis. Journal of Commerce (22206043), Vol. 7, Issue 3, 110-126. [in English].
Sherman, H. D., & Gold, F. (1985). Bank branch operating efficiency: Evaluation with Data Envelopment Analysis. J Bank. Finan, 9(2), 297-315. [in English].
Abstract views: 469 PDF Downloads: 189
Published
2018-12-20
How to Cite
Kyshakevych, B., & Mazharov, D. (2018). A STOCHASTIC FRONTIER ANALYSIS OF UKRAINIAN BANKS EFFICIENCY. Scientific Journal of Polonia University, 31(6), 27-40. https://doi.org/10.23856/3103
Section
Social Sciences
