Investigating bank efficiency in transition economies: A window-based weight assurance region approach

This paper examines the efficiency of 116 banks for nine new EU members in Central and Eastern European (CEE) countries over the period 2004-2015. We employ the weight assurance region (WAR) and we treat deposits as an intermediate variable in a two-stage data-envelopment analysis model. We then expand the WAR model by including a window-based approach to take into account the patterns of efficiency over time. The results indicate a low level of efficiency over the entire period of analysis, especially for Eastern European and Balkan countries rather than Central European countries. Overall, we find that inefficiency in CEE countries is mainly driven by the profitability stage rather than the value added activity stage.