Risk-return efficiency and risk determinants of the European banks

Nurboja, Bashkim (author), Košak, Marko (author)

This study examines risk-return efficiency frontier and risk determinants for 36 banking systems of the European countries. The banks of European developed countries appeared more efficient than the banks of the transition and South East European (SEE) countries. In contrast to other studies, risk was measured as deviation from expected return that we derived through a utility maximization model. We found that volatility of return on assets (ROA) and return on equity (ROE) affects risk positively. In addition, we found that the banking systems of transition countries respond less to changes in volatility of ROA and ROE than the banking systems of European developed countries. Moreover, our robustness check model confirmed that the risk measure that was used can be explained by conventional risk proxies such us Z-score and equity ratio.

• Language: English
• Keywords: banking management, emerging markets, risk management, Europe, banking efficiency, risk, European countries
• Work type: Article
• Typology: 1.01 - Original Scientific Article
• Organization: EF - School of Economics and Business
• Publication status: Published
• Publication version: Version of Record
• Year: 2025
• Number of pages: Str. 129-148
• Numbering: Vol. 20, iss. 1
• PID: 20.500.12556/RUL-173584
• UDC: 336.71
• ISSN on article: 2233-1999
• DOI: 10.2478/jeb-2025-0010
• COBISS.SI-ID: 236365315
• Publication date in RUL: 18.09.2025

Record is a part of a journal

• Title: South East European journal of economics and business
• Shortened title: South east Eur. j. econ. bus.
• Publisher: Sciendo
• ISSN: 2233-1999
• COBISS.SI-ID: 519558681

Licences

• License: CC BY-NC-ND 4.0, Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
• Link: http://creativecommons.org/licenses/by-nc-nd/4.0/
• Description: The most restrictive Creative Commons license. This only allows people to download and share the work for no commercial gain and for no other purposes.

Secondary language

• Language: Slovenian
• Keywords: bančno poslovanje, razvijajoči se trgi, obvladovanje tveganj, Evropa