The study investigates the technical efficiency of primarily locally and regionally operating banks of 16 countries in Europe,
the USA and Japan. The study covers the period of 1998–2004 and decomposes technical efficiency into management-related efficiency
and market-related efficiency respectively. The measurement of market-related efficiency is based on the economic development
level of the region where the bank under study is domiciled. For Europe, the most appropriate delineation of the "home market"
of a bank proved to be the NUTS-2 region of the bank's headquarters, for the USA the "home federal state"' and for Japan the
"home prefecture" of the respective bank. The empirical analysis has been conducted with the help of Data Envelopment Analysis
techniques. The findings support the hypothesis that gross technical efficiency of locally operating banks is, on average,
very low. This applies to local banks in Europe, the USA and Japan regardless of the development level of their "home market".
However, there are marked differences among local banks concerning management-related and market-related efficiency. On average,
management-caused banking efficiency is higher in Europe and Japan than in the USA. Conversely, market-related banking efficiency
in the USA exceeds the respective levels measured for Europe and Japan. Further, local banks domiciled in poor and rural areas
are run by their management far more efficiently than banks doing business in rich metropolitan markets. Finally, the study
presents evidence that local banks in rich but non-metropolitan regions have been the only local banking group responding,
most effectively, to the mounting competitive pressure by means of significant increases in management efficiency.
Keywords:Management efficiency Banking Bank efficiency management-caused efficiency
Forschungsbereich:Makroökonomie und öffentliche Finanzen