An Application of the Meta-frontier Cost Function to the Study of Bank Efficiencies and Technology Gaps in 16 European Countries

Tai-Hsin Huang, Li-Chih Chiang, Kuan-Chen Chen, Po-Hao Chiu

Research output: Contribution to journalArticle


This paper investigates the performance of commercial banks across 16 European countries for the period 1994-2003, adopting the newly developed meta-frontier cost function model by Battese, Raoand and O'Donnell (2004). This model enables the decomposition of the meta-cost efficiency into two components: technical efficiency (CE) and the technology gap ratios (TGR). Most of the mean TGR values for the sample countries are much less than the mean CE values, implying that many banks utilize inferior technologies and operate off the meta-cost frontier. Results show that, over time, the average technical efficiency of the financial sectors in Europe's markets is improving and the technology gap is shrinking. Although technical inefficiencies and technology gaps remain, the current trend toward further de-specialization may lead to a more efficient banking system.
Original languageEnglish
Pages (from-to)25-43
Number of pages19
Issue number3
Publication statusPublished - 2010
Externally publishedYes



  • 共同成本函數
  • 技術效率
  • 技術缺口比率
  • Meta-Frontier Cost Function
  • Technical Efficiency
  • Technology Gap Ratio

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