Appropriate Distribution of Cost Inefficiency Estimates as Predictor of Financial Instability

  1. Gómez Gallego, Juan Cándido
  2. Gómez García, Juan
  3. Pérez Cárceles, María Concepción
Revue:
Estudios de economía aplicada

ISSN: 1133-3197,  1697-5731

Année de publication: 2012

Titre de la publication: La cooperación al desarrollo frente a los retos de la economía global

Volumen: 30

Número: 3

Pages: 1071-1072

Type: Article

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D'autres publications dans: Estudios de economía aplicada

Résumé

The study develops a hypothesis validation process to test whether estimated cost inefficiency fits the theoretical distribution of the estimate of inefficiency, given the initial assumption of a half normal distribution for the ineffi¬ciency term in the stochastic frontier model. The application of this methodology to a sample of Spanish banks in the period 2002-2007 allows us to observe the evolution of the distributions of estimated cost inefficiency. The results confirm for the existence of a relationship between estimated cost inefficiency and the financial situation of these entities. In fact, an increase in the probability of higher levels of inefficiency is observed the period of study, coin-ciding with the beginning of financial instability in the Spanish banking system.

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