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Efficient, profitable and safe banking: an oxymoron? Evidence from a panel VAR approach

1st Person: Koetter, Michael
Additional Persons: Porath, Daniel
Type of Publication: Paper
Language: English
Published: Deutsche Bundesbank 2007
Series: Discussion Paper Series 2
Keywords: Universalbank
Technische Effizienz
Rentabilität
Bankrisiko
Wirtschaftliche Effizienz
Schock
Schätzung
Deutschland
Universal bank
Technical efficiency
Bank risk
Efficiency
Shock
Germany
Online: https://www.econstor.eu/bitstream/10419/19761/1/200702dkp_b_.pdf
id
oai_econstor.eu_10419-19761
recordtype
econstor
institution
MPG
collection
ECONSTOR
title
Efficient, profitable and safe banking: an oxymoron? Evidence from a panel VAR approach
spellingShingle
Efficient, profitable and safe banking: an oxymoron? Evidence from a panel VAR approach
Universalbank
Technische Effizienz
Rentabilität
Bankrisiko
Wirtschaftliche Effizienz
Schock
Schätzung
Deutschland
Universal bank
Technical efficiency
Bank risk
Efficiency
Shock
Germany
Koetter, Michael
Discussion Paper Series 2
title_short
Efficient, profitable and safe banking: an oxymoron? Evidence from a panel VAR approach
title_full
Efficient, profitable and safe banking: an oxymoron? Evidence from a panel VAR approach
title_fullStr
Efficient, profitable and safe banking: an oxymoron? Evidence from a panel VAR approach
title_full_unstemmed
Efficient, profitable and safe banking: an oxymoron? Evidence from a panel VAR approach
title_sort
Efficient, profitable and safe banking: an oxymoron? Evidence from a panel VAR approach
format
electronic Article
format_phy_str_mv
Paper
publisher
Deutsche Bundesbank
publishDate
2007
language
English
topic
Universalbank
Technische Effizienz
Rentabilität
Bankrisiko
Wirtschaftliche Effizienz
Schock
Schätzung
Deutschland
Universal bank
Technical efficiency
Bank risk
Efficiency
Shock
Germany
topic_facet
Universal bank
Technical efficiency
Bank risk
Efficiency
Shock
Germany
author
Koetter, Michael
author2
Porath, Daniel
author2Str
Porath, Daniel
description
Efficiency is considered a key factor when evaluating a bank's performance. Moreover, efficiency enhancement is an explicit policy objective in the Single Market Directive of the European Commission. But efficiency improvements may come at the expense of deteriorating bank profits and excessive risk-taking. Both the quantitative effects and dynamic reactions of performance in response to efficiency improvements remain often unclear on both theoretical and empirical grounds. We analyze the dynamic relations between efficiency and performance in the German banking market. To this end we use panel data for all German banks for the years from 1993 to 2004 and estimate impulse response functions (IRF) derived from a vector autoregressive model. The IRF estimate the response of a shock in efficiency on profits or default probabilities. The former is estimated with stochastic frontier analysis, the latter is estimated with a hazard rate model. The results indicate that a positive unit shift in efficiency reduces the probability of default and increases profits. On the one hand, we find evidence that the long-run impact of profit efficiency on risk is larger than for cost efficiency. However, cost efficiency impacts with a shorter time lag on the probability of default. On the other hand, cost efficiency has on average a slightly larger impact on profits than profit efficiency.
url
https://www.econstor.eu/bitstream/10419/19761/1/200702dkp_b_.pdf
series
Discussion Paper Series 2
seriesStr
Discussion Paper Series 2
Discussion Paper Series 2
series2
Discussion Paper Series 2
series2_facet
Discussion Paper Series 2
up_date
2019-12-06T03:50:18.096Z
_version_
1652140811462115330

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