Cost Efficiency Of Banks Research Articles

Information Technology and Cost Efficiency in Malaysian Banking Industry

It is argued that information technology can increase cost efficiency of banks by offering opportunities to substitute across inputs into production – for example, to substitute computer technology and information networks for labor. Hence, the transition to a knowledge-based financial sector would lead to banks becoming more competitive, more cost effective and better able in managing risks. As such, those banks that failed to make this transition are less able to compete as they lack the capability to innovate and face higher delivery costs. The main objectives of this paper are to determine the impact of IT on banking efficiency and its economies of scale using a sample of Malaysian banks. To achieve these objectives, stochastic cost frontier method is employed to estimate bank efficiency and panel data approach were used to examine the impact of IT on bank efficiency. The results indicate that the impact of IT on bank efficiency increases with increase in bank size, hence further supporting the process of bank mergers that are currently undertaken in the Malaysian banking industry.

DETERMINANTS OF BANK COST EFFICIENCY: EMPIRICAL EVIDENCE FROM BANGLADESH

Due to the trust of depositors, banks should be responsible for efficient utilization of resources to achieve cost efficiency (CE) which in turn contributes to raising income. Previous studies found that the average CE of banks in Bangladesh was around 80%. This study aims to find the determinants of CE in Bangladesh from a sample of 33 banks during a period from 2009 to 2016. Stochastic Frontier Approach (SFA) was used to measure CE in the first stage. In the second stage, different types of regression estimations were used like pooled ordinary least square, fixed effect or random effect panel regression, System-Dynamic Panel Data Estimation and Arellano-Bond Dynamic Panel Data Estimation for comparison. The results showed that Generalized Method of Moments (GMM) specifically the Arellano-Bond Dynamic Panel Data Estimation was best suited for problems of endogeneity, serial correlation, heteroskedasticity and cross sectional dependence in data The results revealed that regulatory capital, risk measured by non-performing loan ratio, liquidity measured by total loans to total deposits, and level of operating costs had a significant negative impact on CE. In contrast, lagged cost efficiency, profitability, years of operation, net interest income had a significant positive impact on CE. To attain competitive advantage by performing with higher CE, policymakers should focus on capital regulation measured by capital adequacy ratio, risk level, profit earning capacity, aggressiveness of banks, bank size, years of operation and level of operating costs.

Does CSR Engagement Affect BankingEfficiency in the Context of a Stochastic CostFrontier

This paper examines the effect of corporate social responsibility (CSR) on the cost efficiency of banks across countries with the measure of CSR compiled from the EIRIS database. We consider CSR as an environmental variable, which allows us to associate CSR with cost efficiency. The empirical results fail to support the greenwashing hypothesis, but partially support the altruistic and strategic motives. Since it takes time for a bank to achieve a higher CSR score, a bank tends to be altruistic in the short-run, while a bank tends to be strategic in the long-run. Key words: CSR score, stochastic cost frontier, environmental variables, altruistic motive, strategic motive

Impact of Camel Variables on Cost Efficiency of Indian Scheduled Commercial Banks

Impact of Camel Variables on Cost Efficiency of Indian Scheduled Commercial Banks

Consumer Welfare Effect of Banks’ Lending Services in the Ghanaian Banking Industry

The study examines the relationship between the consequential social cost of market power (i.e. welfare performance of banks) and cost efficiency using data covering the period 2009 to 2017 from the Ghanaian banking industry. The study adopts the Ordinary Least Squares (OLS), Fixed Effect (FE) panel regression and the Quantile regression (QR) approaches to control for heterogeneity and provide increased room for policy relevance. The Two-Stage Least Squares Instrumental Variables (2SLS-IV) regression is used to ensure the robustness of the findings against the problem of possible reverse causality. The results indicate a positive relationship between banks’ welfare performance and cost efficiency, which suggests that greater cost efficiency hedges welfare losses. In other words, welfare gains and cost-efficient banks are not mutually exclusive. Also, the results show evidence that the sensitivity of welfare gain to cost efficiency depends on knowledge of local market dynamics. Further, the findings from the QR estimation suggest that, but for welfare loss at low (Q.25) to the median (Q.50) quantiles, cost efficiency is a necessary and sufficient condition to hedge the welfare losses. The results demonstrate that financial consumer protection cannot be achieved without cost efficiency in the presence of both foreign banks and high market knowledge. Therefore, our paper suggests an integrated cost efficiency policy approach that has the complementary effect of a robust information sharing mechanism and incentives to hedge against welfare losses in the banking sector of emerging economies. Moreover, if welfare gain is synonymous with cost-efficient banks, then the presence of a quiet life is typical of financial consumer protection. This study provides insight into the importance of cost efficiency to the public policy of financial consumer protection in an era of foreign banks’ dominance. From the review of prior literature, this paper is the first to apply the QR estimation technique to examine the effect of cost efficiency throughout the conditional distribution of bank welfare performance rather than just the conditional mean effect of cost efficiency.

Performance dos bancos brasileiros no contexto de digitalização

Considerando o contexto de digitalização do sistema bancário brasileiro, o presente estudo avalia como o investimento em tecnologia vem afetando a performance das instituições financeiras. Diversos estudos avaliaram o impacto da digitalização nos resultados dos bancos. Hernando & Nieto (2007) e Ciciretti, Hasan & Zazzara (2009) identificaram ganhos de rentabilidade e redução de custos com a implantação do internet banking nos bancos espanhóis e italianos. Neste estudo foram analisadas, por meio de regressões lineares, a relação entre investimentos em TI e medidas de rentabilidade (ROA, ROE e margem de intermediação) e despesas (de pessoal e administrativas). Foi também avaliada, por meio de uma análise envoltória de dados (DEA), a evolução das eficiências técnica, de custos e alocativa dos bancos brasileiros, sendo os resultados segregados em termos dos investimentos em TI. Os resultados sugerem que o investimento em tecnologia da informação pelos bancos possui uma relação significativamente positiva com as variáveis de rentabilidade e negativa com as despesas administrativas, corroborando parcialmente com os estudos de Hernando & Nieto (2007). Foi verificado também melhora na eficiência técnica dos bancos brasileiros ao longo do período analisado, principalmente entre aqueles que possuem maior investimento em TI.

Applying SFA and DEA in Measuring Banks Cost Efficiency in Relation to Lending Activities: The Case of Vietnamese Commercial Banks

Applying SFA and DEA in Measuring Banks Cost Efficiency in Relation to Lending Activities: The Case of Vietnamese Commercial Banks

Does efficiency help banks survive and thrive during financial crises?

We examine how bank efficiency during normal times affects survival, risk, and profitability during subsequent financial crises using data from five U.S. financial crises and preceding normal times. We find that cost efficiency during normal times helps reduce bank failure probabilities, decrease risk, and enhance profitability during subsequent financial crises, while profit efficiency has limited benefits. Results suggest that cost efficiency better measures management quality, while profit efficiency may partially reflect temporary high returns from risky investments during normal times. Findings have policy implications and imply that improving bank cost efficiency during normal times may promote better financial crisis performance.

Evaluating Bank Cost Efficiency Using Stochastic Frontier Analysis

The study seeks to assess the cost efficiency of the commercial banks in Zimbabwe using the stochastic frontier analysis. The cost efficiency of the Zimbabwean banks is estimated using the trans-log stochastic frontier approach. The Stochastic Frontier Analysis methodology is among the host of methods that has been used to measure banking sector efficiency. The analysis of cost efficiency of commercial banks has important implications for the economy since an efficient banking system has potential to reduce interest rates which can lead to increased investment and growth for the economy. The cost of doing business in Zimbabwe is perceived to be high hence improved bank efficiency has the potential to reduce the cost of doing business. The average cost efficiency scores for the Zimbabwean banks over the study period show that the banking sector in Zimbabwe experiencing 17 percent inefficiency. The efficiency levels have been declining over the years reflecting increased resource wastage in the system. The study recommends that the banking institutions should continue to innovate so as to reduce their inefficiencies.

THE PECULIARITY OF THE COOPERATIVE AND MUTUAL MODEL: EVIDENCE FROM THE EUROPEAN BANKING SECTOR

The crucial role of mutual banks in promoting local development is highlighted by an extensive theoretical and empirical literature. The historical success of mutual banks derives not only from their specific business model, but also from their peculiar and distinguishing corporate governance with member ownership. According to a copious literature, these features have probably allowed mutual banks to better withstand financial crisis. This work compares the cost efficiency of European mutual banks by analyzing a sample which consists of the universe of all the banks operating in Italy, Germany, France and Spain over the period 2011–2016, by employing a stochastic approach (Stochastic Frontier Analysis-SFA) to determine the effects of the recent financial crisis on the efficiency level of this particular kind of bank. The analysis aims to point out the determinants of efficiency in order to understand if the mutual model reveals to be still attractive in the modern banking system. The main contribution of the paper to previous literature consists in comparing different impacts of financial crisis on efficiency of mutual banks in main European countries. Furthermore, the results enrich the recent debate about the cooperative and mutual banking system and its raison d’être. Our results show that the European mutual banks reveal a higher degree of efficiency with respect to commercial banks. Cost efficiency appears to be significantly and negatively related to the level of regulatory capital, the level of credit risk, the level of leverage and the cost-income ratio. On the other hand, it is significantly and positively related to the profitability of the traditional lending activity, to the level of prudence in terms of provisions against credit risk and to the amount of liquidity as a buffer against unexpected troubles.

The Global Financial Crisis, Fiscal Stimulus Package and the Chinese Banking Sector — A Pre- and Post-Efficiency Analysis

This study is the first to examine the impact of two recent key events on technical, cost and profit efficiencies of Chinese commercial banks — the 2007 Global Financial Crisis (GFC) and the subsequent Chinese Government’s 2009 fiscal stimulus package. Stochastic frontier analysis together with univariate and multivariate tests are used on a sample of 143 banks, including the big five, joint stock, city, rural and foreign, over the 2006–2013 period. Overall, there is substantial scope for improvement — cost efficiency could improve by up to 50%; technical and profit efficiencies by up to 30%. The effect of the crisis and the stimulus package on various overall and segment efficiencies is, at best, inconsistent and inconclusive.

Cost Efficiency Analysis of Local Commercial Banks in Taiwan

This study uses a stochastic frontier analysis (SFA) model to evaluate the relative cost efficiency of commercial banks in Taiwan in the wake of liberalization. The model is estimated using data made available through Taiwan's Banking Bureau and Financial Supervisory Commission. With data from before and after the 2008 financial crisis, our central result is that banks affiliated with bank holding companies (BHC) have become increasingly more efficient. While unaffiliated banks have generally increased their efficiency, they have not kept pace with respect to efficiency gains. Secondary findings are that, independent of ownership structure, both balance sheet and income statement composition affect efficiency. In particular, bank efficiency increases with growth in loans and capital prices. We also find evidence that labor productivity is a key explanatory factor behind efficiency differences across banks. As a result, a policy recommendation is made that banks invest in maximizing worker productivity. Finally, in addition to the insights gained from this study we contribute to the general literature on both bank efficiency and the use of the SFA model by applying it to new data in a new setting.

Shadow Banking, Bank Ownership, and Bank Efficiency in China

ABSTRACT This study uses 15 years of bank data and a one-stage stochastic frontier analysis framework to examine how shadow banking affects the profit and cost efficiency of Chinese banks. Our results indicate that shadow banking is negatively related to both profit and cost efficiency and positively related to earnings volatility, credit risk and liquidity risk of the Chinese banks. In examining the performance of foreign banks with that of local Chinese city commercial banks, we find that foreign banks in China are less profit- and cost-efficient, supporting the home-field-advantage hypothesis that domestic banks are more efficient than foreign banks.

The Effects of Alliance Strategies on the Cost Efficiency of Saudi Commercial Banks

The Objective of this study is to determine the influence of strategic alliances on the cost efficiency of Saudi banks. For this, we first develop a theoretical framework paving the way for an empirical study that refers to a sample of 09 Saudi banks adopted to verify this relationship. It is therefore, necessary to list the interests of strategic alliances in the banking sector and to question the role of public and foreign as wellas public and private alliance strategies in improving the cost efficiency of Saudi commercial banks.A quantitative approach has been adopted to explore and understand the research problem. We begin by regressing the ordinary least squares efficiency on a series of explanatory variables. The conceptual research model is tested by two different regression equations that will be estimated simultaneously. The first regression, aims to test the impact of the public-foreign alliance on the efficiency of the banks in our sample. As for the second regression, it is carried out to test the impact of the public-private alliance on the latter.The results of this study prove that the creation of an alliance agreement allows Saudi commercial banks to improve their efficiency and constitute for them an opportunity besides an interesting strategic option. Forthermore, public-private and public-foreign alliances are strategies that can improve the efficiency of public banks, increase their competitiveness and reduce their fragility.

Determinants of Indian banks efficiency: A Two-stage approach

Analysing the performance of banks at periodical intervals assumes importance from the perspective of bankers, investors and regulator. This study seeks to examine the cost, revenue and profit efficiency of Indian banks during 2004 to 2013 using data envelopment analysis (DEA) and identifies the determinants of efficiency using Tobit regression. Results show that the cost and profit efficiency of banks are positively correlated and reveal that if the banks are cost efficient, they are also profit efficient. Further, profit efficiency is the better differentiator of performing and non-performing banks, in Indian context. The main determinants of efficiency of banks under cost, revenue and profit DEA models are size and management of the banks. Contrary to popular belief, the GDP growth has an inverse relationship with efficiency of the banks.

Impact of Banking Supervision on the Cost-Efficiency of Banks: A Study of Five Developing Asian Countries

The main purpose of banking supervision is to ensure stable banking operations, minimize the risk to the stability of financial systems, increase banking efficiency, and promote competitiveness. However, the question is whether, and how, banking supervision benefits or damages banking efficiency. The purpose of this study is to investigate the different effects of financial regulations on the cost-efficiency of the banking industries in India, Thailand, Bangladesh, Malaysia, and Mongolia, by employing the stochastic frontier approach (SFA) and stochastic metafrontier function (SMF) for a sample of 141 commercial banks between 2000 and 2010. The findings show that bank efficiency is not significantly influenced by the minimum capital requirements; however, higher capitalization helps to alleviate agency problems between managers and shareholders, and gives shareholders greater incentives to monitor management’s performance and ensure that their banks operate efficiently. Finally, for banking supervision in the five countries, SMF is estimated under the metafrontier cost function, whether a technology gap ratio (TGR) or meta-cost efficiency (MCE). It is revealed that Indian banks have the best results with TGR and MCE at 0.7527 and 0.6715, respectively, while Thailand has the lowest TRG value at 0.4608 and Malaysia the lowest MCE value at 0.3531.

Abstracts of Ph.D theses on Algeria presented at British Universities, 2002 to 2017

The Maghreb Review, Vol. 44, 1, 2019 © The Maghreb Review 2019 This publication is printed on FSC Mix paper from responsible sources ABSTRACTS OF PH.D THESES ON ALGERIA PRESENTED AT BRITISH UNIVERSITIES, 2002 TO 2017 CURATED AND EDITED BY MOHAMED BEN-MADANI EDITORIAL NOTE Our earlier abstracts of English language theses on Algeria, 1945-2001, were published in Volume 26, Numbers 2-4, 2001, which included Ph.D theses presented in US and Canadian Universities. Similarly Abstracts of English Language Theses on Morocco 1928-2000, Volume 26, Numbers 2-4, 2001; 2001-2012, Volume 38, No. 2, 2013; 20122013 , Volume 39, Number 4, 2014, pp 482-500; 2014, Volume 40, Number 4, 2015, pp. 515-519; 2015-2016, Volume 42, Number 4, 2017, pp. 461-472; and Abstracts of English Language Theses on Libya, 1936-2012, Volume 41, Number 1, 2016 and 2013-2015, Volume 43, Number 3, 2018. These volumes are still available and can be ordered through our website: www.maghrebreview.com. We shall continue to publish supplements of Abstracts of Theses on Morocco, Algeria, Libya, and Tunisia in future issues of The Maghreb Review. These abstracts have not been included in any bibliographical work in the past and are arranged in Alphabetical order by author. FOREIGN NEWS IN COLONIAL ALGERIA, 1881-1940, PH.D, UNIVERSITY OF OXFORD, 2016, ASSERAF, ARTHUR This thesis looks at how news shaped people’s relationship to the world in Algeria under French rule. This territory operated under an uncertain legal status that made it both a part of France and a colony, and within it lived a society divided between European settlers and Muslim natives. Accounts of recent events helped Algerians determine what was domestic and what was foreign in a place where those two notions were highly contested. Colonialism did not close Algeria off from the world or open it up, instead it created a particular geography. In a series of case-studies taken from across Algeria, this thesis investigates a wide range of types of news: manuscripts, rumours, wire dispatches, newspapers, illustrations, songs, newsreels, and radio broadcasts. It focuses on the period in which Algeria’s legal status as part of France was most certain, from the end of the conquest and the consolidation of Republican rule in the 1880s to the outbreak of the Second World War. In this period, authorities thought the influence of outside events on Algeria was a bigger threat than disturbances within. Because of this, state surveillance produced reports to monitor foreign news, and these form the backbone of this study. But ABSTRACTS OF PH.D THESES ON ALGERIA, 2002 TO 2017 113 state attempts to manage the flow of news had unintended effects. Instead of establishing effective censorship, authorities ended up spreading news and making it more politically sensitive. Settlers, supposedly the state’s allies, proved highly disruptive to state attempts to control the flow of information. Through a social history of information in a settler colonial society, this research reconsiders the relationship between changes in media and people’s sense of community. From the telegraph to the radio, new technologies worked to divide colonial society rather than tying it together, and the same medium could lead to divergent senses of community. BANK COST AND ALTERNATIVE PROFIT EFFICIENCY IN ALGERIA, MOROCCO AND TUNISIA OVER THE PERIOD 1994-2001, PH.D, UNIVERSITY OF WALES, BANGOR, 2004 BAKHOUCHE, ABDERAZAK This thesis examines the cost and alternative profit efficiency of a sample of Algerian, Moroccan and Tunisian banks over the financial liberalisation period 1994-2001. The translog functional form and intermediation approach are employed in this study to derive inefficiency estimates as well as scale economies levels and scale inefficiencies estimates. The results show that inefficiencies are substantial in the three banking systems under study, with an average of 29% of cost inefficiency and 32% of alternative profit inefficiency. Scale economies and scale inefficiencies are also found to be not negligible at an average level of 46% and 9%, respectively, with a negative relationship between assets size class and scale economies and scale inefficiencies estimates. The analysis also principally reveals that; first, Moroccan and Tunisian banks are more cost efficient than their counterparts in Algeria, secondly...

A STOCHASTIC FRONTIER ANALYSIS OF UKRAINIAN BANKS EFFICIENCY

The authors have developed a model for assessing the Ukrainian banks cost efficiency by means of Stochastic Frontier Analysis, in which the banks are considered as financial intermediaries. On the basis of the likelihood ratio test results the trans-logarithmic function steps forward in the role of the bank’s cost function. In the role of input variables we used the value of fixed assets, the price of labor and price of loanable fund, in the role of output − total loans, other assets and total cost.

DETERMINANTS OF BANKING SECTOR PERFORMANCE IN UZBEKISTAN

ABSTRACT This paper analyses determinants of banking sector performance in Uzbekistan over the last two decades. In this purpose, it has been deeply studied that the relationship between the structure of bank ownership and bank performance. To test our hypothesis, we use the econometric cost frontier approach - measured the performance of banking sector in terms of efficiency, using Trans-Log Cost and Profit Function with panel analysis for 29 Uzbekistan’s banks over the period 2003-2017. This study has been carried out to show possible difference between state-owned banks and the other types of bank ownership (private, joint-stock and foreign owned banks) in Uzbekistan from the perspective of performance. Moreover, this paper discovered an interesting pattern on a substance effect of bank ownership to banking sector performance of Uzbekistan before and after the 2008s financial crisis. The result reveals that the structure of bank ownership is a key determinant for the banking sector performance in Uzbekistan and that it does matter before the 2008s financial crisis in the banking system. Furthermore, this study finds that bank capitalization and price policy are insignificant determinants for banking sector performance of Uzbekistan. More importantly, on average, state-owned banks operated more cost efficient and less profit efficient than other types of banks in Uzbekistan in the last decade. These are interesting findings, because the cost efficiency of the state-owned banks is consistent with the “development” theory (A. Gerschenkron, 1962), and the profit inefficiency of the state-owned banks is more likely connected with the “political” theory (La Porta et al., 2002). Furthermore, it has been concluded that there is a significant space for improving the overall performance of the banking sector through privatization of the state-owned banks by implementing good corporate governance practice in the banking system of Uzbekistan. Keywords state-owned, joint stock, foreign and private banks, bank performance, determinants, bank ownership, corporate governance, cost efficiency and profit efficiency.

Comparison of efficiency and technology across the banking systems of Vietnam, China and India

PurposeGiven some similarities in the banking industry and economic condition across Vietnam, China and India, the purpose of this paper is to estimate and compare the cost and revenue efficiency of banks across these three countries over the period 1995–2011.Design/methodology/approachThis study employs the meta-frontier of Battese et al. (2004) and O’Donnell et al. (2008) which envelops the three country-frontiers to measure the cost and revenue efficiency of banks in these three countries.FindingsThis study finds that Chinese banks adopt the most advanced cost-reducing and revenue-increasing technology when providing banking products to their customers, followed by Indian banks. Indian banks are as cost-efficient as Chinese banks, but more cost-efficient than Vietnamese banks. Indian banks are as revenue-efficient as Vietnamese banks, but less revenue-efficient than Chinese banks. Over the analysis period, banks in the three countries have employed the more advanced technology in reducing costs, and they have become more cost-efficient. Nonetheless, for revenue side, the improvement in revenue efficiency and adopted technology are observed only in Chinese banks. The main source of meta-cost and meta-revenue inefficiency of these banking systems stems from undertaking inferior technology rather than managerial ability. Results from comparison across bank types show that state-owned banks (SOBs) are more cost and revenue-efficient than privately owned banks, with Indian and Chinese SOBs being the most cost- and revenue-efficient, respectively.Practical implicationsTo improve meta-cost efficiency, Chinese and Indian banks would constitute a relevant benchmark for Vietnamese banks, while to improve meta-revenue efficiency, Chinese banks would be considered as a relevant benchmark for Vietnamese and Indian banks.Originality/valueThis is the first study which utilizes meta-frontier to compare cost and revenue efficiency and technology across banks in Vietnam, China and India.