Efficiency of consumer credit companies in the EU: a cross-country frontier analysis

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The aim of this work is to provide empirical elements on the performance of consumer credit companies in the European Union by applying efficiency frontier techniques. These techniques, widely applied in banking literature, provide sophisticated measures of performance - the efficiency scores. We measure the cost and profit efficiency of consumer credit companies in seven EU countries in the period 1996-2000.

After investigating the market structure of EU consumer credit industries, we provide evidence on quite a large level of cost and profit inefficiencies in the EU, but also on large differences among countries. We show, however, that cross-country differences in efficiency are significantly caused by the environment in which consumer credit firms operate. The analysis of the determinants of efficiency shows few significant correlates. Finally, the evolution of efficiency between 1996 and 2000 does not support the hypothesis of a process of convergence on cost and profit efficiency among EU countries. Thus, our results tend to support the absence of a positive impact of European integration on the efficiency of consumer credit companies.