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Journal of Productivity Analysis

, Volume 39, Issue 2, pp 177–190 | Cite as

An assessment of Portuguese banks’ efficiency and productivity towards euro area participation

  • Miguel BoucinhaEmail author
  • Nuno Ribeiro
  • Thomas Weyman-Jones
Article

Abstract

This paper analyses the production technology of Portuguese banks during the 1992–2006 period through the estimation of a translog cost frontier. This period is of major interest because it covers Portugal’s euro area accession and its impact on the banking system. Hence, critical factors impacting the banking system are identified against the background of increasing financial integration prior to the financial crisis that started in 2007 and later translated into strains in some European sovereign debt markets. Banks are modelled as firms which produce loans and other earning assets, choosing the cost minimizing combination of labour, capital and interest bearing debt, subject to holding a predetermined level of equity. According to the results of this study, technological progress has shifted the cost frontier downwards throughout the period under consideration, whereas the distance at which banks have operated from the frontier seems to have remained constant. Further, increases in production under scale economies have also contributed to the recorded increase in productivity.

Keywords

Bank performance Marginal costs X-efficiency Total factor productivity change 

JEL Classification

G21 L13 

Notes

Acknowledgments

We are grateful to Diana Bonfim for helpful comments and suggestions provided since early stages of this work. Comments and suggestions provided by Mário Centeno, Filipa Lima, Pedro Pita Barros and seminar participants at the EWG-EPA 2010 Conference are also gratefully acknowledged. Any errors or omissions remain our own.

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Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  • Miguel Boucinha
    • 1
    Email author
  • Nuno Ribeiro
    • 2
  • Thomas Weyman-Jones
    • 3
  1. 1.Economics and Research DepartmentBanco de Portugal and Nova School of Business and EconomicsLisbonPortugal
  2. 2.Economics and Research DepartmentBanco de PortugalLisbonPortugal
  3. 3.Department of EconomicsLoughborough UniversityLoughboroughUK

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