Faculty Scholarship 1994 - Present

Effects of Production Scale, Location and Foreign Participation on Bank Efficiency in a Transition Economy: The Ukranian Experience

The paper investigates technical and scale efficiencies of commercial banks in Ukraine during the 1998-2003 transition period. Banks in Ukraine on average waste almost half of their factor inputs during the production of financial services, mostly due to operating off the efficient frontier. Large banks dominate small banks in terms of technical efficiency; small banks are superior to larger banks in term of scale efficiency. Surprisingly, most Ukrainian banks, although very small relative to banks in other countries, are experiencing decreasing returns to scale. There is also a significant number of small banks suffering from Idle capacity.