Jurnal f Applied Ecnmics. Vl IX N. Ma 2006 9-38 PROUCTIVITY GROWTH IN THE GREEK BANKING INUSTRY 9 PROUCTIVITY GROWTH IN THE GREEK BANKING INUSTRY: A NON-PARAMETRIC APPROACH ANTHONY N. REZITIS Universi f Iannina Submied Jul 2003 acceped Augus 2004 This paper invesigaes prducivi grwh and echnical efficienc in he Gree baning indusr fr he perid 982-997. I als cmpares he 982-92 and 993-97 sub-perids since afer 992 he Gree baning secr eperienced subsanial changes. The Malmquis prducivi inde and he EA mehd are used measure and decmpse prducivi grwh and echnical efficienc respecivel. Prducivi grwh is higher afer 992. Recen grwh is mainl aribued echnical prgress while unil 992 grwh is mainl aribued imprvemens in efficienc. Furhermre afer 992 pure efficienc is higher and scale efficienc is lwer indicaing ha alhugh bans achieved higher pure echnical efficienc he mved awa frm pimal scale. Finall Tbi resuls shw ha size and specializain have psiive effecs n bh pure and scale efficienc. JEL classificain cdes: C6 G2 24 Ke wrds: Gree baning efficienc prducivi grwh Malmquis inde EA I. Inrducin The purpse f his paper is invesigae prducivi grwh in he Gree baning indusr fr he perid 982-997. Furhermre his paper cmpares and cnrass prducivi grwh resuls beween he sub-perids 982-992 and 993-997 since afer 992 wih he enacmen f he Secnd Baning irecive he prcess f deregulain and liberalizain f he Gree baning secr acceleraed. ramaic and subsanial changes have aen place ha encuraged cmpeiin in he indusr b enacing he abliin f credi raining deregulaing ineres raes eliminaing he requiremen f baning insiuins inves a significan prin f heir reserves in public bnds and permiing free enr baning insiuins frm abrad. These facrs geher wih he Anhn N. Reziis: Universi f Iannina Schl f Naural Resurces and Enerprise Managemen eparmen f Farm Organizain and Managemen 2 G. Seferi Sr. Agrini 30 00 Greece. Tel: 326407439. Fa: 3264039579. E-mail: areziis@cc.ui.gr.
20 JOURNAL OF APPLIE ECONOMICS develpmen and adpin f infrmain echnlg and he prvisin f new prducs and services are cnsidered have caused changes in he prducivi and efficienc f he Gree baning indusr. Unil he mid-980s he Gree baning indusr peraed in an envirnmen heavil cnrlled and regulaed b he Cenral Ban which had graduall caused significan disrins and grea inefficienc in he Gree financial ssem. The pes f regulain included barriers he develpmen f new financial prducs he regulain f ineres raes specific asse-hlding and branching as well as cmple credi rules ha deermined he ineres raes n business lans. These financial regulains aimed a achieving ecnmic plic pririies se b he Gree gvernmen such as he financing f sae-wned firms he develpmen f small and medium-sized enerprises he epansin f eprs ec. The perain f he baning indusr was under such cmplee dminance f he mnear auhriies ha i caused he absence f cmpeiin in he indusr. In paricular he Cenral Ban f Greece and w majr sae-wned bans he Nainal Ban f Greece and he Cmmercial Ban f Greece alms cmpleel dminaed he baning indusr. As a resul bans absained frm adping advanced echnlg due he absence f cmpeiin in he indusr. Twards he end f he 980s he Gree baning indusr graduall mved wards a mre deregulaed ssem due inernainal develpmens and he need paricipae in he Single Eurpean Mare and he EMU. In he 990s he Gree baning indusr was affeced b he harmnizain f nainal regulains wihin he EU and mainl b he enacmen f he Secnd Baning irecive in 992 which sugh faciliae he liberalizain f financial mares and enable bans and her financial insiuins perae hrughu he Eurpean Unin EU under a single baning license. In his paper he invesigain f prducivi grwh is achieved b appling a nn-parameric mehd develped b Fare e al. 989 which cmpues al facr prducivi TFP grwh b using a Malmquis inde f prducivi change. Wihin his framewr prducivi grwh ma ccur due a cmbinain f indusr-wide echnlgical change i.e. a shif in prducin surface and a change in echnical efficienc a he level f he peraing uni i.e. mvemen wards r awa frm he prducin surface. The Malmquis inde can be decmpsed capure hese w cmpnens i.e. echnlgical change and change in echnical efficienc. Furhermre he efficienc cmpnen can be decmpsed in a pure echnical and a scale efficienc change cmpnen. This paper als presens echnical efficienc measures fr he enire perid 982-997 and fr he sub-perids 982-992 and 993-997 which illusrae hw clsel an peraing uni funcins in relain he prducin frnier. Technical efficienc
PROUCTIVITY GROWTH IN THE GREEK BANKING INUSTRY 2 indicaes he degree which he peraing uni prduces he maimum feasible upu fr a given level f inpus r uses he minimum amun f feasible inpus prduce a given level f upu. Higher efficienc frm ne perid anher des n necessaril sugges ha he peraing uni achieves higher prducivi since echnlg ma have changed. There are a large number f nn-parameric sudies ha eamine he baning indusries arund he wrld. The papers b Berger and Humphre 997 and Gddard e al. 200 prvide an eensive review f he lieraure n he efficienc and prducivi f financial insiuins. There is hwever a small number f nn-parameric sudies ha have invesigaed he efficienc and prducivi grwh f he Gree baning indusr. The ms recen nn-parameric sudies include wr b Nulas 997 Gias 99 and Vassilglu and Gias 990 bu hese sudies are limied a small ime hrizn. In paricular he firs sud refers he 99-992 perid while he secnd and hird he ears 988 and 987 respecivel. In addiin he sudies b Gias 99 and Vassilglu and Gias 990 eamine he relaive efficienc f he branches f nl ne ban he Cmmercial Ban f Greece. I shuld als be ned ha here are few parameric sudies ha eamine he efficienc and prducivi f he Gree baning secr. Amng his research are sudies b Apergis and Reziis 2004 and Chrispuls and Tsinas 200. The firs sud eamines he cs srucure echnical change and prducivi in he baning indusr fr he perid 982-997 using a radiinal ranslg cs funcin apprach. Hwever his sud des n measure he degree f efficienc f he Gree baning indusr due he inabili f he apprach used d s. The her sud eamines he ecnmic efficienc f Gree baning during he perid 993-998 using a schasic frnier apprach. The paper is rganized as fllws: Secin II describes he Malmquis TFP inde while Secin III presens he daa. Secin IV discusses he empirical resuls and Secin V prvides he cnclusins. II. Mehdlg A. Prducivi Change Prducivi change ver ime is an indicar f he perfrmance f an indusr. This sud calculaes he Malmquis prducivi inde as a measure f al facr prducivi change. The Malmquis inde apprach has been used in a varie f sudies relaed he financial secr measure prducivi change. In paricular his apprach has been applied in sudies such as Berg e al. 992
22 JOURNAL OF APPLIE ECONOMICS eamine he prducivi f he Nrwegian baning secr during he deregulain f he 980s; Fuuama 995 measure efficienc and prducivi grwh in he Japanese baning indusr during he 989-99 perid; Nulas 997 cmpare efficienc and prducivi differences amng sae and privae bans in Greece during he 99-992 perid; Leighner and Lvell 998 cnsruc prducivi indices fr Thai bans fr he perid 989-994; Gilber and Wilsn 998 sud he effecs f deregulain n he prducivi f Krean bans during he perid 99-994; Muherjee e al. 200 eplre prducivi grwh fr a grup f large US cmmercial bans ver he iniial ps-regulain perid 984-990; Canh and ermine 2003 eamine baning efficienc and prducivi in Prugal during he deregulain perid 990-995; and Casu e al. 2003 invesigae prducivi change in Eurpean baning during he 994-2000 perid. The advanages f he Malmquis prducivi inde are ha i des n mae assumpins abu he pimizing behavir f he prducers and i allws fr inefficienc Fare e al. 994. Furhermre he Malmquis inde des n rel n ecnmeric esimain bu insead i uses a nnparameric apprach similar ha used b daa envelpmen analsis EA. The advanages f using a nnparameric apprach are ha i avids impsing a parameric specificain fr he underling echnlg as well as fr he disribuinal assumpin f he inefficienc erm. Hwever here are sme weanesses assciaed wih a nnparameric apprach. Firs since a nnparameric mehd is deerminisic and aribues all he variain frm he frnier inefficienc a frnier esimaed b i is liel be sensiive measuremen errrs r her nise in he daa. In her wrds i des n deal wih schasic nise. Anher weaness f a nnparameric mehd is ha i des n permi saisical ess and hpheses perain prducin srucure and he degree f inefficienc. In his paper a nnparameric apprach is used because i is relaivel less daa demanding i.e. i wrs quie well wih a small sample size cmpared a parameric apprach. Thus he small sample size f his sud which cnains nl 6 bans is cnducive he use f a nnparameric apprach. The Malmquis prducivi inde as presened b Fare e al. 989 is lined wih he use f disance funcins which describes muli-inpu muli-upu prducin echnlg wihu he invlvemen f eplici price daa and he need specif behaviral assumpins such as prfi maimizain r cs minimizain. isance funcins are classified in upu and inpu disance funcins. An upu inpu disance funcin is defined as he reciprcal f he maimum minimum prprinal epansin cnracin f he upu inpu vecr given
PROUCTIVITY GROWTH IN THE GREEK BANKING INUSTRY 23 an inpu upu vecr Fare e al. 994. In his sud upu disance funcins are used. I shuld be saed ha a prducin echnlg shuld be deermined befre an upu disance funcin is defined. Le a muliple-inpu and mulipleupu prducin echnlg a ime S be defined as: S = { : can prduce } = T where is an N inpu vecr and is an M upu vecr. Then he upu disance funcin a ime is defined as: = inf{θ : /θ S } = T. 2 The disance funcin in 2 is defined as he reciprcal f he maimum prprinal epansin f he upu vecr given inpu vecr under perid echnlg. If he upu vecr is n he bundar r frnier f echnlg hen he value f he disance funcin is ne i.e. he prducin is echnicall efficien herwise i is less han ne i.e. he prducin is echnicall inefficien. Fare e al. 989 shwed ha he Malmquis al facr prducivi inde is represened as he gemeric mean f w Malmquis indees and is defined as: M = 3 [ ] M M = [ ] /2 /2 where M and M are Malmquis indices measuring prducivi change beween perids and and are defined using echnlg a ime and respecivel. In addiin Fare e al. 989 indicaed ha he Malmquis prducivi inde given b equain 3 can be decmpsed in w cmpnens: he efficienc change FCH cmpnen which measures hw much clser he prducin frnier he peraing uni is in perid cmpared perid and i is referred as he caching up effec and he echnical change TCH cmpnen which capures he change in he prducin echnlg as a shif in he prducin frnier. Thus equain 3 is wrien as fllws:
JOURNAL OF APPLIE ECONOMICS 24 2 / = M 4 where: FCH = and 2 / = TCH 5 Prducivi advances ccur if M >. In a similar wa imprvemens in efficienc ccur if FCH> and echnical advances ccur if TCH>. Fare e al. 994 shwed ha he efficienc change FCH cmpnen f he inde culd be wrien as he prduc f w cmpnens: he pure efficienc change PCH cmpnen and he scale efficienc change cmpnen SCH. In paricular: and 2 / = VRS VRS SCH where VRS is variable reurns scale and VRS indicaes disance funcins calculaed under he assumpin f variable reurns scale. Values f SCH> indicae ha he peraing uni has becme mre scale efficien. In rder esimae he cmpnen disance funcins f he Malmquis inde he daa envelpmen analsis EA a nn-parameric echnique f linear prgramming is used. Mre specificall he Malmquis prducivi inde 4 is calculaed b slving fur linear prgramming prblems each ne f which crrespnds each f he fur disance funcins:. B assuming cnsan reurns scale hese disance funcins are calculaed b using he fac ha he upu disance funcin is reciprcal Farrell s 957 upu-based echnical efficienc measuremen Fare e al. 994. Therefre he disance funcin fr each = K is calculaed as fllws: 6 VRS VRS PCH = 7 8
subjec è = z K 0 PROUCTIVITY GROWTH IN THE GREEK BANKING INUSTRY 25 = ma è 9 m z n K = z n m m =...M; n =...N; =...K where = K bans prducing m= M upus m a each ime perid = T. These upus are prduced wih he use f n= N inpus n and z is he inensi variable idenifing wha een a paricular ban is empled in prducin. The her hree disance funcins are calculaed similarl subsiuing he apprpriae inde i.e. r. In rder derive he decmpsiin f he efficienc change FCH cmpnen 5 in he pure efficienc change PCH cmpnen 7 and he scale efficienc change SCH cmpnen 8 he calculain f w mre disance funcins is needed. These funcins are: VRS and VRS and as indicaed he shuld be calculaed under he variable reurns scale echnlg. This is achieved K if he resricin z = is added in he linear prgramming prblem 9. = B. Technical Efficienc The Malmquis prducivi inde and is cmpnens presened previusl are calculaed n he basis f measures f echnical efficienc. Technical efficienc measures are calculaed fr each ban each ear f he perid 982-997 based n he EA mdel 9. Ne ha in his paper r /θ defines he upu riened echnical efficienc measure which varies beween zer and ne Celli e al. 997. This echnical efficienc measure is n nl influenced b he pure echnical efficienc bu als b he prducin scale. Thus he abve echnical efficienc measure which can be viewed as he verall echnical efficienc OTE can be decmpsed in pure echnical efficienc PTE and scale efficienc SCE cmpnens. Therefre he cnsan reurns scale echnlg assumpin f mdel 9 is relaed hse f variable reurns scale VRS and nn-increasing K reurns scale NIRS b incrpraing he resricins z = and K = z = respecivel. Therefre w mre efficienc measures are prduced
26 JOURNAL OF APPLIE ECONOMICS based n VRS and NIRS. In paricular he pure efficienc PTE measure is given b VRS since i ecludes he prducin scale impac and he scale efficienc SCE measure which is defined as he rai f VRS ha is: SCE =. 0 VRS Ne ha NIRS VRS. This indicaes ha SCE. If SCE = hen ban is scale efficien; if SCE < hen ban is scale inefficien due eiher decreasing reurns scale RS as NIRS = VRS r increasing reurns scale IRS as NIRS < VRS. The eplanain f differences in efficienc amng bans relies n a secnd sep in he analsis which cmpues a limied dependen variable Tbi regressin n he efficienc scres i.e. PTE and SCE. Ban characerisics egenus he peraing prcess bu assumed be surces f he differen efficienc levels are incrpraed in his sep. The equain righ-censred a uni fr he Tbi mdel is: Z where r * = where β is a vecr f esimaed parameers Z is he limied dependen variable i.e. PTE r SCE X is a vecr f independen variables i.e. ban specific characerisics and ε is assumed be a nrmal i.i.d. errr erm. Celli e al. 997 discuss several was in which envirnmenal variables can be accmmdaed in a EA analsis. The erm envirnmenal variables is usuall used describe facrs which culd influence he efficienc f a firm. In his case such facrs are n radiinal inpus and are assumed be uside he cnrl f he manager. The w-sage mehd used in his paper invlves he sluin f a EA prblem in a firs-sage analsis which cmprises nl he radiinal upus and inpus. In he secnd sage he efficienc scres bained frm he firs sage are regressed n he envirnmenal variables. The main disadvanage f his mehd is ha if he variables used in he firs sage are highl crrelaed wih he variables used in he secnd sage hen he resuls culd be biased. Alhugh here are a number f alernaive appraches dealing wih envirnmenal variables in ms = β X ε Z Z = Z * if if Z Z * * < *
PROUCTIVITY GROWTH IN THE GREEK BANKING INUSTRY 27 cases Celli e al. 997 recmmend he use f he w-sage apprach because f is several advanages. The main advanages f he w-sage apprach are ha i can accmmdae mre han ne variable; i can accmmdae bh cninuus and caegrical variables; i maes n prir assumpin regarding he direcin f he effec f he caegrical variable; hphesis ess can be perfrmed es if he variables have an significan effec n efficienc; and he mehd is simple and eas calculae. III. aa In he baning lieraure here is sme debae abu wha cnsiues inpus and upus fr bans. Ms baning sudies have ended adp ne f he w main appraches he inpu and upu specificain i.e. he inermediain apprach and he prducin apprach. The inermediain apprach cnsiders bans as financial inermediaries ha cnver depsis and purchased funds in lans and financial invesmens. This apprach reas lans as upus while depsis and her liabiliies are reaed as inpus. Oupus are measured in value erms and css include bh ineres epenses and prducin css. On he her hand he prducin apprach cnsiders bans as prducers f lan services and depsi accuns using capial and labr as inpus. Oupus are measured in erms f he number f accuns serviced and css include prducin css bu n ineres epenses. This sud uses he inermediain apprach which is he apprach ms cmmnl used in he lieraure Faver and Papi 995 Fuuama 995 amng hers. aa used in his analsis are hse used in Apergis and Reziis 2004. Mre specificall he daa were bained frm he annual reprs f si individual bans fr he perid 982 997. Fur f he bans used in he sample were sae bans while he her w were privae. Sae bans cnrlled apprimael 80% f he mare and dminaed he Gree baning indusr during he perid under cnsiderain. Privae bans acuall began ener he baning secr jus afer 987. The Gree financial-credi ssem is characerized b ne f he smalles number f credi insiuins in he EU. Is characerisics include he prevailing rle f a few large sae-wned bans a small share f freign-wned bans and he presence f a few Gree bans wih inernainal perain. The sae bans included in he sample are he Nainal Ban f Greece he Cmmercial Ban f Greece he Inian Ban and he Ban f Macednia and Thrace. The privae bans are he Alpha Credi Ban and he Erg Ban. This sud specifies w upu and hree inpu variables Nulas 997. Variables in values are defined in real erms where 992 is he base ear. In paricular he w
28 JOURNAL OF APPLIE ECONOMICS upu variables and 2 are defined as he value f lans and advances which includes shr and lng erm lans and advances indusr and cusmers and he value f invesmen asses 2 which includes shares and her variableincme securiies paricipain in cmpanies invesmens in fied incme securiies and gvernmen securiies. The hree inpu variables 2 and 3 are defined as labr which is he al number f full-ime emplees capial epenses 2 which is defined as fied asses including angible fied asses such as buildings ls land furniure ffice equipmen ec. ne f depreciain and inangible fied asses such as research and develpmen epenses gdwill sfware underwriing epenses resrucuring epenses ec. and finall he value f depsis 3 which includes ban bnds and sie saving and ime depsis. Table reprs he descripive saisics f he variables used in he analsis fr he perid 982-997. The aa Envelpmen Analsis Prgram EAP f Celli 997 is used cmpue prducivi and efficienc measures presened in his paper. The muli-sage EA is used cmpue he efficienc measures such as verall echnical efficienc OTE pure echnical efficienc PTE and scale efficienc SCE measures. Table. escripive saisics b ban fr he perid 982-997 Ban Variables 2 2 3 c m Mean 65.34 6.555 3067.688 7.343 307.328 0.56 0.23 S. ev. 45.79 8.773 499.7 6.24 89.484 0.02 0.030 Min 08.60 56.39 2480.000 7.668 68.380 0.496 0.080 Ma 27.3 304.32 3906.000 29.285 460.423 0.565 0.87 2 Mean 336.73 9.32 6589.875 3.370 667.950 0.730 0.74 S. ev. 29.80 36.545 736.26 4.073 93.795 0.40 0.00 Min 27.357 26.36 520.000 7.032 460.674 0.498 0.42 Ma 372.734 369.74 7658.000 2.856 830.32 0.876 0.88 3 Mean 6.684 8.347 24.88 3.76 9.494 0.803 0.026 S. ev. 29.743 5.787 53.90.558 63.428 0.055 0.008 Min 25.579 2.73 559.000.929 34.773 0.685 0.04 Ma 9.04 20.64 222.000 6.653 242.02 0.87 0.040 4 Mean 072.835 467.565 464.83 47.077 2636.398 0.78 0.583 S. ev. 204.744 53.538 339.755 0.906 500.8 0.60 0.047 Min 652.726 73.545 695.000 30.082 709.432 0.500 0.490 Ma 39.476 390.725 69.000 70.4 352.24 0.894 0.646
PROUCTIVITY GROWTH IN THE GREEK BANKING INUSTRY 29 Table. Cninued escripive saisics b ban fr he perid 982-997 Ban Variables 2 2 3 c m 5 Mean 48.838 65.82 2989.250 6.7 327.204 0.729 0.080 S. ev. 20.46 79.50 589.526 2.95 66.443 0.54 0.009 Min 24.932 7.380 295.000 3.869 209.46 0.500 0.067 Ma 200.80 245.264 4097.000 3.03 436.440 0.899 0.098 6 Mean 37.9 7.08 948.33.738 53.548 0.836 0.06 S. ev. 4.798 0.77 432.33 0.887 30.3 0.93 0.006 Min 5.302 0.207 78.000 0.589 2.753 0.53 0.003 Ma 59.08 28.470 520.000 2.957 97.893 0.990 0.022 Nes: is value f lans 2 is value f invesmen asses is number f full-ime emplees 2 is capial epenses 3 is value f depsis c is cncenrain inde m is mare share. Variables in values are in millin drachmas and are defined in real erms 992 base ear. The efficienc scres i.e. PTE and SCE are regressed n he ban specific facrs using a Tbi mdel since levels f efficienc var frm zer ne. Cnsequenl he Tbi mdels fr eamining he relainship beween each efficienc measure and ban specific characerisics in his paper can be cnsruced as fllws: PTE 2 = f m c d 2 d 3 d 4 d 5 d 6 d 993 2 SCE 2 = f 2 m c d 2 d 3 d 4 d 5 d 6 d 993 3 where m is he mare share f ban ; c is he service cncenrain which is he sum f he squared rais f he value f each upu al value f upus f ban ; 2 is he ime rend squared; d i where i= 2 6 is a ban specific dumm variable which crrespnds each ban in he sample; d 993 is a dumm variable which aes he value f zer fr he perid 982-992 and he value f ne fr he perid 993-997. The mare share is uilized in rder capure size. A psiive negaive effec f he mare share indicaes ha efficienc increases decreases wih size. The service cncenrain is used measure a ban s degree f specializain. Values f service cncenrain clse ne indicae ha a ban is specialized in a single prduc. A psiive negaive effec n his variable suggess ha specializain increases decreases efficienc. A psiive negaive effec f he ime rend shws ha efficienc increases decreases ver ime while
30 JOURNAL OF APPLIE ECONOMICS he effec f he ime rend squared shws he rae f efficienc change ver ime. The effec f each ban specific dumm variable indicaes hw he efficienc level f each ban is shifing in relain he efficienc f ban. Finall he effec f he d 993 dumm variable indicaes wheher he efficienc level fr he 993-997 perid during which subsanial financial changes place is differen frm ha f he 982-992 perid. The ban specific dumm variables are included capure differences beween bans wih reference facrs such as wnership saus public versus privae managerial quali and labr relains amng hers. I is wrh menining ha sme f he radiinal feaures f he Gree baning ssem which mainl characerize he sae-cnrlled bans are sric labr relains inadequae saff mivain and inadequae managemen. Since he behaviral bjecives are differen beween public and privae bans i wuld als be apprpriae fr he sae f cmparisn divide he sample in public/privae sub-samples and perfrm EA fr each sub-sample Celli e al. 997. Hwever in he presen sud his apprach is n suiable due he small sample size since nl w privae and fur public bans were eamined. IV. Empirical Resuls A. Technical Efficienc Table 2 presens he mean level f he varius efficienc measures i.e. verall OTE pure PTE and scale efficienc SCE fr each ear f he perid 982-997 fr he whle perid and fr he w sub-perids 982-992 and 993-997. I is wrh ning ha hese w sub-perids are cnsidered because as discussed in he Inrducin subsanial changes place in he Gree baning indusr afer 992. The resuls indicae ha he mean level f verall efficienc is 0.93 fr he whle perid and fr he w sub-perids. This implies ha bans culd have increased upus b 8.7% n average while sill using he same level f inpus. The average values f he w echnical efficienc cmpnens i.e. PTE and SCE fr he perid 982-997 sub-perids: 982-992 and 993-997 are 0.982 0.977 0.994 fr pure echnical efficienc and 0.929 0.934 0.98 fr scale efficienc. This indicaes ha pure echnical inefficienc cnsiues a smaller surce f inefficienc han scale inefficienc fr he bans in he sample under cnsiderain. In her wrds he majr lss f efficienc fr he sample bans is idenified as imprper scale perain. A cmparisn f he echnical efficienc cmpnens f The saisics in Table 2 are als available b ban frm he auhr.
PROUCTIVITY GROWTH IN THE GREEK BANKING INUSTRY 3 Table 2. Mean echnical efficienc measures and frequenc disribuin f ban reurns scale Year Mean echnical efficienc measures Frequenc disribuin f reurns scale OTE PTE SCE IRS CRS RS Level f echnical efficienc Number f bans 982 0.789 0.935 0.843 3 3 0 983 0.804 0.946 0.850 2 4 0 984 0.925 0.947 0.977 2 4 0 985 0.932 0.965 0.966 5 0 986 0.935 0.987 0.947 2 4 0 987 0.922 0.982 0.939 2 4 0 988 0.896 0.985 0.90 3 3 0 989 0.957.000 0.957 2 4 0 990 0.979 0.999 0.980 0 5 99 0.933 0.999 0.934 4 992 0.972.000 0.972 2 4 0 993 0.95.000 0.95 2 4 0 994 0.945.000 0.945 2 3 995 0.968.000 0.968 2 4 0 996 0.855 0.99 0.863 4 2 0 997 0.882 0.979 0.90 5 0 982-997 0.93 0.982 0.929 35 36.46% 58 60.42% 3 3.3% 982-992 0.93 0.977 0.934 20 30.30% 44 66.67% 2 3.03% 993-997 0.93 0.994 0.98 5 50.00% 4 46.67% 3.34% Nes: OTE is verall echnical efficienc PTE is pure echnical efficienc SCE is scale efficienc IRS is increasing reurns scale CRS is cnsan reurns scale RS is decreasing reurns scale. Figures in parenhesis give cumulaive frequenc disribuin resuls. he w sub-perids shws ha he sub-perid 982-992 has a lwer higher mean level f pure scale efficienc han ha f he sub-perid 993-997. The empirical finding ha he pure echnical efficienc is higher in he secnd subperid han in he firs ne is aribued he increased cmpeiin and inernainalizain f he Gree baning ssem which happened in he secnd sub-perid due he acceleraed liberalizain and deregulain f he financial ssem. These facrs geher wih he fas adpin f infrmain echnlg
32 JOURNAL OF APPLIE ECONOMICS b he bans have caused majr srucural changes in he Gree baning indusr during he secnd sub-perid which ma have mved he bans awa frm an pimal scale f perain. This is indicaed b he finding ha scale efficienc is lwer in he secnd sub-perid han in he firs. The increased cmpeiin f he Gree baning secr during he secnd sub-perid is suppred b he sud f Hndriannis e al. 999 which prvides evidence ha he Gree baning indusr has decreased is ligplisic characer and has mved wards cndiins f mnplisic cmpeiin during he perid 993-995. Table 2 als presens he frequenc disribuin f ban reurns scale fr each ear f he perid 982-997. I als shws he cumulaive frequenc disribuin fr he whle perid and fr he w sub-perids. The resuls indicae ha while ms f he bans peraed under CRS in he firs sub-perid he mved IRS in he secnd ne. This finding furher accrds wih he afremenined argumen ha he use f infrmain echnlg during he secnd sub-perid has mved he bans awa frm an pimal scale f perain. The finding ha bans peraed under CRS in he firs sub-perid is suppred b he sud f Kalafcas and Manaas 996 which indicaes ha scale ecnmies did n eis in he Gree baning indusr during he 980-989 perid. Table 3 presens Tbi resuls f pure PTE and scale SCE efficienc scres n he ban specific facrs accrding mdels 2 and 3. I shuld be saed ha ms f he esimaed cefficiens in bh mdels are saisicall significan and indicae ha he mdels fi he daa well. Furhermre he high values f he R- Squared i.e. 0.83 fr he PTE and 0.86 fr he SCE mdel shw ha he eplanar pwer f he Tbi mdels are significan. The resuls shw ha mare share has a psiive impac n bh PTE and SCE scres a he 0.05 significance level. Tha is bans epli ecnmics f scale as heir sizes epand. A psiive relainship eiss beween he bans service cncenrain and bh PTE and SCE scres a he 0. and 0.05 significance level respecivel. In her wrds bans wih a higher service cncenrain enj higher PTE and SCE due he eisence f gains frm specializain. The effec f he ime rend variable is psiive n bh PTE and SCE scres a he 0.0 significan level impling ha PTE and SCE increase wih ime. Hwever he impac f he ime rend squared variable is negaive n bh efficienc scres a he 0.05 significan level indicaing ha he rae f change f bh PTE and SCE decreases wih ime. The cefficiens f he ban specific dummies d 2 -d 6 shw ha here is significan variain f bh efficienc scres hrughu he sample bans. Finall he cefficien f he d 993 dumm variable has a psiive effec n he PTE scre a he 0.05 significan level bu a negaive effec n he SCE scre a he same significan level. This implies ha bans in he 993-997 sub-perid have higher lwer PTE SCE scres han hse in he 982-992 sub-perid.
PROUCTIVITY GROWTH IN THE GREEK BANKING INUSTRY 33 Table 3. Tbi resuls f pure echnical efficienc and scale efficienc Variable PTE SCE Inercep 0.830 *** 0.7384 *** 0.05 0.09 m.57 **.865 ** 0.50 * 0.87 c 0.622.8268 ** 0.33 0.87 0.059 *** 0.0279 *** 0.0 0.0 2-0.00076 ** -0.005 ** 0.00 0.00 d 2-0.0885 ** -0.270 * 0.04 0.07 d 3-0.0059-0.0442 ** 0.04 0.02 d 4 0.4932 ** 0.5992 ** 0.20 0.27 d 5-0.0039-0.008 * 0.02 0.00 d 6 0.089 ** 0.0458 ** 0.04 0.02 d 993 0.0278 ** -0.083 ** 0.0 0.0 σ 0.054 *** 0.0972 *** 0.00 0.0 Lg lielihd 48.64 87.58 R-squared 0.83 0.86 Nes: PTE is pure echnical efficienc SCE is scale efficienc In. is inercep m is mare share c is cncenrain inde is ime rend d is ban specific dumm d 993 is 0 befre 993 and - herwise σ is he sandard deviain f he residuals f he mdel. *** ** and * indicae ha he cefficiens are significanl differen frm 0 a he 0.0. 0.05 and 0. levels respecivel. The figures in parenheses are sandard errrs.
34 JOURNAL OF APPLIE ECONOMICS B. Prducivi change Table 4 presens he Malmquis prducivi inde i.e. al facr prducivi change TFP and is cmpnens echnical efficienc change FCH echnical change TCH pure efficienc change PCH and scale efficienc change SCH fr he perid 982-997 and fr he w sub-perids 982-992 and 993-997. 2 If he value f he Malmquis prducivi inde r an f is cmpnens is less greaer han ne i denes deerirain imprvemen in perfrmance. The resuls indicae ha al facr prducivi TFP increased a an average rae f 2.4% per ear ver he enire 982-997 perid. On average his imprvemen is ascribed a echnical prgress TCH f.2% and an efficienc imprvemen FCH f.2%. The laer in urn is aribued a scale efficienc imprvemen SCH f 0.8% and a smaller pure efficienc imprvemen PCH f 0.4%. Table 4. Malmquis prducivi inde and is cmpnens Year FCH TCH PCH SCH TFP 982-983.05.047.04.00.063 983-984.222 0.76.002.220 0.874 984-985.02.09.025 0.988.23 985-986.00.20.027 0.984.3 986-987 0.986.064 0.995 0.992.049 987-988 0.973.03.003 0.970.073 988-989.073.023.06.057.098 989-990.025 0.789 0.999.026 0.809 990-99 0.948.05 0.999 0.949.047 99-992.047 0.977.00.046.023 992-993 0.932.07.000 0.932 0.948 993-994.039.032.000.039.073 994-995.028.059.000.028.088 995-996 0.874.22 0.99 0.882 0.980 996-997.038.002 0.988.05.040 982-997.02.02.004.008.024 982-992.020 0.997.007.02.07 993-997 0.992.053 0.995 0.998.044 Nes: FCH is echnical efficienc change TCH is echnical change PCH is pure efficienc change SCH is scale efficienc change TFP is he al facr prducivi change Malmquis prducivi inde. 2 The saisics in Table 4 are als available b ban frm he auhr.
PROUCTIVITY GROWTH IN THE GREEK BANKING INUSTRY 35 Cmparing he w sub-perids 982-992 and 993-997 he secnd subperid has a higher TFP han he firs ne wih an average rae f 4.4% versus.7% per ear. The finding ha TFP n average is higher in he secnd sub-perid culd be aribued he increased cmpeiin and inernainalizain f he Gree baning ssem which place in he secnd sub-perid due he acceleraed liberalizain and deregulain f he financial ssem. I is wrh menining again he sud f Hndriannis e al. 999 which prvides evidence f increased cmpeiin in he Gree baning secr during he secnd subperid. I is eviden ha he surce f he al facr prducivi grwh in he case f he secnd sub-perid cmes enirel frm an average echnical prgress f 5.3% per ear since here is an average deerirain in efficienc f 0.8% per ear. The afremenined deerirain in urn is ascribed a pure efficienc deerirain f -0.5% and a scale efficienc deerirain f -0.2%. Ne ha he ppsie is rue fr he firs sub-perid in which he surce f he al facr prducivi grwh cmes eclusivel frm an average imprvemen in efficienc f 2% per ear since here is an average echnical regress f -0.3% per ear. This efficienc imprvemen is due a sligh pure efficienc imprvemen f 0.7% and a srng scale efficienc imprvemen f.2%. The empirical finding ha al facr prducivi grwh which riginaes eclusivel frm echnical change is higher in he secnd sub-perid han in he firs is aribued he rapid adpin f new infrmain echnlg b Gree bans. The deerirain in efficienc bserved during he secnd sub-perid culd be aribued he presence f adjusmen css relaed he use f his new echnlg. As fr he firs sub-perid given he empirical finding f echnical regress bans used he eising echnlg as efficienl as pssible and fr his reasn al facr prducivi grwh during his sub-perid resuled slel frm imprvemens in efficienc. V. Cnclusins This sud eamines prducivi grwh and echnical efficienc in he Gree baning indusr fr he perid 982-997. Furhermre i cmpares prducivi grwh befre and afer 992 since afer 992 he Gree baning indusr has eperienced a rapid accelerain f liberalizain and deregulain. This paper uses he Malmquis prducivi inde measure and decmpse he al facr prducivi grwh as well as he EA mehd measure echnical efficienc. I
36 JOURNAL OF APPLIE ECONOMICS shuld be ned ha ne f he main limiains f he EA mehd is he presence f uliers which ma influence he empirical resuls especiall in he presen sud since he sample used cnsiss f nl si bans. Hwever he resuls f he presen sud in erms f ban level efficienc and prducivi measures d n shw big discrepancies amng bans. This indicaes an absence f uliers in he sample. The resuls indicae ha prducivi grwh increased n average b 2.4% per ear ver he enire perid. The findings f increased prducivi grwh afer deregulain in he presen sud are in accrdance wih baning indusr resuls bained in her sudies. Fr insance he paper b Casu e al. 2003 suggess clear prducivi grwh fr Ialian and Spanish bans during deregulain a grwh mainl ascribed echnical prgress. Addiinal papers indicaing imprvemen in prducivi due deregulain are he sudies b Muherjee e al. 200 fr US bans Gilber and Wilsn 998 fr Krean bans and Leighner and Lvell 998 fr Thai bans. Ms f he afremenined sudies aribue heir findings f acceleraed prducivi echnical prgress. There is hwever a number f empirical sudies which des n suppr he claim ha deregulain increases prducivi in he baning secr i.e. he sudies b Humphre and Pulle 997 fr US bans and Casu e al. 2003 fr French and German bans. The empirical resuls shw ha he average level f verall echnical efficienc is 9.3% suggesing ha bans culd have increased upus b 8.7% wih he eising level f inpus. The high verall echnical efficienc scres f he presen sud are in line wih baning indusr resuls bained in her sudies. Fr eample high echnical efficienc scres are presened b Chrispuls and Tsinas 200 fr Gree bans Faver and Papi 995 fr Ialian bans and Elasiani and Mehdian 995 fr US bans. The finding f he presen paper ha he mean verall echnical efficienc is he same fr he w sub-perids agrees wih he sud f Berger and Humphre 997 suggesing ha he cnveninal wisdm which implies ha deregulain imprves efficienc is n alwas suppred b empirical sudies. Fr insance amng he sudies indicaing ha efficienc was relaivel unchanged b deregulain are he sudies b Elasiani and Mehdian 995 fr US bans and Ha e al. 200 fr Krean bans. Furhermre research b Khumbaar e al. 200 n Spanish bans repred ha efficienc was diminished afer deregulain. On he her hand amng he sudies repring imprvemens in efficienc afer deregulain are he sudies b Berg e al. 992 f Nrwegian and Ausralian bans and Canh and ermine 2003 f Pruguese bans.
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38 JOURNAL OF APPLIE ECONOMICS cmpeiive cndiins in he Gree baning ssem Jurnal f Inernainal Financial Mares Insiuins and Mne 9: 377-39. Humphre avid B. and Lawrence B. Pulle 997 Bans respnses deregulain: Prfis echnlg and efficienc Jurnal f Mne Credi and Baning 29: 23-93. Karaflas S. and G. Manaas 996 A ne n cs srucure and ecnmies f scale in Gree baning Jurnal f Baning and Finance 20: 377-387. Khumbaar Subal C. Ana Lzan-Vivas C. A. Kn Lvell and Ifehar Hasan 200 The effecs f deregulain n he perfrmance f financial insiuins: The case f Spanish saving bans Jurnal f Mne Credi and Baning 33: 0-2. Leighner Jnahan E. and C. A. Kn Lvell 998 The impac f financial liberalizain n he perfrmance f he Thai bans Jurnal f Ecnmics and Business 50: 5-3. Muherjee Kanana Subhash C. Ra and Sephen M. Miller 200 Prducivi grwh in large US cmmercial bans: The iniial ps-deregulain eperience Jurnal f Baning and Finance 25: 93-939. Nulas Ahanasis G. 997 Prducivi grwh in he Hellenic baning indusr: Sae versus privae bans Applied Financial Ecnmics 7: 223-228. Vassilglu M. and. I. Gias 990 A sud f he relaive efficienc f ban branches: An applicain f daa envelpmen analsis Jurnal f Operainal Research Scie 4: 59-597.