EFFICIENCY OF THE UKRAINIAN BANKING SECTOR
DOI:
https://doi.org/10.37659/2663-5070-2022-9-50-60Keywords:
stochastic frontier methodology, translog, banking sector, cost efficiency estimates, variablesAbstract
The aim of this paper is to study the cost efficiency of the Ukrainian banking sector based on the data from banks’ annual reports to the National Bank of Ukraine. This study applied the stochastic frontier methodology to a sample of 233 Ukrainian banks for a six-year period between 2014 and 2019, which showed that the overall mean cost efficiency of Ukrainian banks in the sample is 0.593. The results indicate that the same level of output could be produced with 59.3% of inputs if the banks were operating on the efficient frontier. The results of this study confirm that the Ukrainian banking sector is inefficient and high cost since roughly 40% of inputs are wasted during the production of financial services process.
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