Estimating bank manager preferences for technical and allocative efficiency in Europe

Modeling the complex behavioral tendencies of bank managers presents significant difficulties. To address this, we utilize a flexible functional form based on a managerial preference framework, capable of accommodating both linear and nonlinear behaviors. This approach effectively captures managerial decision-making, whether their preferences are balanced or skewed. Applying this method to EU banks, we analyze managerial inclinations regarding technical and allocative efficiency, while also examining how these preferences differ among commercial, savings, and cooperative banking models. The results indicate a noticeable asymmetry, with a stronger emphasis on allocative efficiency. Additionally, we investigate the factors influencing these preferences, including market structure indicators like the Herfindahl Index, interest rate spreads, and the z-score.