Keywords

envelopment analysis, efficiency frontier, operating approach, intermediation approach, Croatia, banks

An understanding of a bank's relative efficiency is important for analysts, practitioners and policymakers alike. In this paper, we analyze bank efficiency in Croatia between 1995 and 2000, using Data Envelopment Analysis. We find that foreign-owned banks are on average most efficient, that the new banks are more efficient than the old ones, and that smaller banks are globally efficient but large banks appear to be efficient when we allow for variable returns to scale. We also find that there has been strong equalization in terms of average efficiency in the Croatian banking market, both between and within the peer groups of banks.