EFFICIENCY IN COOPERATIVE BANKS AND SAVINGS BANKS: A STOCHASTIC FRONTIER APPROACH

In this article, we used a stochastic frontier model to estimate the cost efficiency of cooperative banks and savings banks from nine countries over the period 2005 to 2011. In addition, we analyzed the influence of certain variables that quantify the risk and performance of cooperative banks and savings banks on the level of inefficiency. We found that both the cooperative banks from Switzerland and the savings banks from Norway and Sweden have a high level of cost efficiency. With regard to the variables that influence the inefficiency level, the results showed that a higher risk implies the growth of this level, while an increase in performance leads to a decrease in inefficiency. The results showed that a higher rate of the Gross Domestic Product (GDP) growth implies an increase in the inefficiency level. Smaller cooperative and savings banks are more efficient in managing costs compared to larger banks. We interpreted this result as being a consequence of the advantages from which this institutions benefit within the groups to which they belong.