Abstract
The main purpose of this paper is to assess the cost-efficiency of Banco Ciudad de Buenos Aires’s bank branches using a Stochastic Frontier Analysis (SFA). With the results, management can decide on new branching dimension. Also, if some regulatory or managerial limits could be lift, such as closure or opening of new branches without the central bank authorization, or redundant staff reduction, the results could be important for management. We detect best and worst behaved branches. The more cost-efficient branches and the least cost-efficient ones differ in their size and input mix. Nonetheless, they present a similar output mix.
Highlights
The main purpose of this paper is to assess the cost efficiency of Banco Ciudad de Buenos Aires’s (BCBA) bank branches using a Stochastic Frontier Analysis (SFA)
We adapted the lessons from the literature review to take into consideration the specific entity we study and the particular problems and constraints it faces
Translog models in both cases are preferred to Cobb-Douglas specifications according to the Likelihood Ratio (LR) test
Summary
The main purpose of this paper is to assess the cost efficiency of Banco Ciudad de Buenos Aires’s (BCBA) bank branches using a Stochastic Frontier Analysis (SFA). We estimate cost efficiency and compare the cost efficiency of the worst situated branches with the best performers according to the cost efficiency criteria. This is one of several possible uses of the tool. The BCBA is the official bank of Buenos Aires City It was founded in 1878 and ranks as the eighth largest provider of bank loans in Argentina and the second local one in the mortgages market. It has 66 branches and some 3,200 employees. This goal faces some management constraints (for instance, it is not a pure profit maximizer, and employees enjoy stability as public servants), plus regulations of the Central Bank of Argentina restrict decisions to all banks in the country concerning free branches’ creation or closing
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