Efficiency Consideration of MBIs in the Greek Banking Sector.

Abstract

The objective of this paper is to analyze the performance implication of management buy-ins (MBIs) in the Greek banking sector. Two alternative approaches can be used to analyze the performance impact of MBIs. The first approach considers MBIs as “environmental factors”, in the sense of Coelli and Perelman (1999), that affects outputs produced directly. The second approach assumes that MBIs affect outputs indirectly through the realization of maximum potential output and thus it is included in the technical inefficiency effect term of, for example, the Battese and Coelli (1995) model. We present and compare the results obtained from these two models and we also propose and estimate a third alternative model which combines the above two. To model the variable related to MBI we employ Amess (2003) formulation with an interval-type dummy which covers the period before and after the MBI. In the empirical model we use detailed input and output data to estimate an input distance function using stochastic frontier approach (SFA). The data set consists of yearly observations for 42 banks over the period 1998-2007.