Non - performing loans and productive performance : evidence from USA banks
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Ανδριακόπουλος, Παναγιώτης
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Abstract
This study calculates bank efficiency in USA banking system taking into account the presence of nonperforming loans in balance sheets of US banks. By employing Data Envelopment Analysis (DEA) method and using the idea of Directional Distance Function (DDF) to consider problematic loans on 3792 banks over the period 2001-2019 we find that on average large banks are more efficient than small banks. This finding supports the presence of positive association between bank size and technical efficiency confirming the Efficient Structure Hypothesis which implies a positive relationship between efficiency and market power.
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Keywords
Bank efficiency, Nonperforming loans, Data envelopment analysis