@techreport{Koetter2006cost,
abstract = {We investigate the consistency of efficiency scores derived with two competing frontier
methods in the financial economics literature: Stochastic Frontier and Data
Envelopment Analysis. We sample 34,192 observations for all German universal
banks and analyze whether efficiency measures yield consistent results according to
five criteria between 1993 and 2004: levels, rankings, identification of extreme performers,
stability over time and correlation to standard accounting-based measures
of performance. We find that non-parametric methods are particularly sensitive to
measurement error and outliers. Furthermore, our results show that accounting for
systematic differences among commercial, cooperative and savings banks is important
to avoid misinterpretation about the status of efficiency of the total banking
sector. Finally, despite ongoing fundamental changes in Europe?s largest banking
system, efficiency rank stability is very high in the short run. However, we also find
that annually estimated efficiency scores are markedly less stable over a period of
twelve years, in particular for parametric methods. Thus, the implicit assumption of
serial independence of bank production in most methods has an important influence
on obtained efficiency rankings.},
author = {Michael Koetter and Alexander Karmann and Elisabetta Fiorentino},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {L25; G21; D24; 330; Cost Efficiency; Banks; Stochastic Frontier Approach; Data Envelopment Analysis; Bank; Kostenfunktion; Technische Effizienz; Data-Envelopment-Analyse; Sch\"{a}tzung; Deutschland},
language = {eng},
number = {2006,10},
title = {The cost efficiency of German banks: a comparison of SFA and DEA},
type = {Discussion Paper, Series 2: Banking and Financial Supervision},
url = {http://hdl.handle.net/10419/19757},
year = {2006}
}
