Efficiency of Slovak Banking Sector Before and after the EU Accession

We investigate the influence of Slovakia accession to European Union on efficiency of Slovak banks over the period 2001-2009. Using a nonparametric approach, we estimate five different efficiency scores, namely cost, allocative, technical, pure technical, and scale efficiency. To test the impact of potential determinants on bank efficiency, we use t test based on 103 bank-year observations. We find a significant association between accession of Slovakia to European Union and bank efficiency. Contrary to previous studies, we do not find foreign banks are in general more efficient than domestic banks. However, we find foreign banks are significantly more pure technically, but significantly less scale efficient implying that domestic banks should improve their management, while foreign banks should readjust their size. Also, we find small banks are more efficient than large banks, which is partly due to the fact that large banks are oversized and operate at the decreasing returns to scale