Exploring efficiency differences over time in the Spanish banking industry

Over the last 15 years the competitive conditions under which Spanish banking firms operate have become much tighter. Deregulation has affected both banks and savings banks, allowing them to expand geographically and to choose less regulation-conditioned output mixes. This paper analyzes how, in these circumstances, banking efficiency has been affected considering two specifications of output and analyzing the dynamics of the entire distribution, not only mean and standard deviation. Results differ depending on the output definition, but they show that, in general, efficiency scores exhibit dynamic patterns that only two moments of the distribution hardly capture. In particular, regardless of the output definition considered, efficiency scores were more dispersed in 1985 and more concentrated in 1995, and there were substantial changes in firms' efficiency relative positions, as measured by transition probability matrices. In addition, the multi-modality of the distributions has almost disappeared at the end of the period.