Estimation of Efficiency Change in the Czech Banking Sector Employing the Window Malmquist Approach

The aim of this chapter is to examine efficiency change in the Czech banking sector using the Window Malmquist approach within the period 2004-2013. We use the Window Malmquist model to estimate efficiency change of commercial banks in the Czech Republic. The Window Malmquist index is determined in order to investigate the levels of and the changes in the efficiency of the Czech commercial banks over the analysed period. By this approach, the technical efficiency is examined sequentially with a certain window width (i.e. the number of years in a window) using a panel data of the Czech commercial banks. The Window Malmquist index is based on Data Envelopment Analysis (DEA) models. We found that the average Window Malmquist index reaches the annual average growth of 5% in CCR and 3% in BCC models. This positive efficiency change was caused by average annual growth of technological change. In the period 2010-2013, the positive value of Window Malmquist index was as a result of positive value of efficiency change (catch-up effect).