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Analyzing the Efficiency of European Banks: A DEA-Based Risk and Profitability Approach

Analyzing the Efficiency of European Banks: A DEA-Based Risk and Profitability Approach

Mehmet Hasan Eken, Suleyman Kale, Huseyin Selimler
Copyright: © 2015 |Pages: 28
ISBN13: 9781466662681|ISBN10: 1466662689|EISBN13: 9781466662698
DOI: 10.4018/978-1-4666-6268-1.ch062
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MLA

Eken, Mehmet Hasan, et al. "Analyzing the Efficiency of European Banks: A DEA-Based Risk and Profitability Approach." Banking, Finance, and Accounting: Concepts, Methodologies, Tools, and Applications, edited by Information Resources Management Association, IGI Global, 2015, pp. 1151-1178. https://doi.org/10.4018/978-1-4666-6268-1.ch062

APA

Eken, M. H., Kale, S., & Selimler, H. (2015). Analyzing the Efficiency of European Banks: A DEA-Based Risk and Profitability Approach. In I. Management Association (Ed.), Banking, Finance, and Accounting: Concepts, Methodologies, Tools, and Applications (pp. 1151-1178). IGI Global. https://doi.org/10.4018/978-1-4666-6268-1.ch062

Chicago

Eken, Mehmet Hasan, Suleyman Kale, and Huseyin Selimler. "Analyzing the Efficiency of European Banks: A DEA-Based Risk and Profitability Approach." In Banking, Finance, and Accounting: Concepts, Methodologies, Tools, and Applications, edited by Information Resources Management Association, 1151-1178. Hershey, PA: IGI Global, 2015. https://doi.org/10.4018/978-1-4666-6268-1.ch062

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Abstract

Basic financial and profitability ratios such as net interest margin, return on assets, and return on equity alone do not measure bank performances effectively as they lack the risks associated. Since the success of banks in managing performance is expected to be largely dependent on the correct pricing and management of risks, a proper measurement of efficiency should include the effects of risks. The purpose of this study is to benchmark risk profiles of European commercial banks and performance indicators during the 2006-2009. The research is implemented based on four models by Data Envelopment Analysis with data of 697 banks from 37 countries. The results suggest that there is an extensive inter- and intra-country risk efficiency of banks. Profitability increase is not always directly proportional to risk increase, and the financial crisis substantially decreased the risk efficiency of banks, especially in 2008 in developed economies.

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