Efficiency Of Commercial Banks Research Articles

Digital finance, bank competition shocks and operational efficiency of local commercial banks in Western China

The rise of information technology has triggered the digital financial revolution and reshaped the competitive landscape of the commercial banking industry. This transformation has profoundly affected the operating efficiency of many small and medium-sized traditional commercial banks in Western China. We combine panel data from 130 local commercial banks in Western China from 2008 to 2021 to investigate the impact of digital finance on the operational efficiency of these local commercial banks. Our findings indicate that the overall operational performance of local commercial banks in Western China has declined under the influence of digital finance. Additionally, the intensification of banking competition has disrupted the established traditional market competition structure, with this mechanism exerting a more pronounced weakening effect on the operational performance of these local banks. This research provides rational recommendations for the high-quality development of the banking industry in the Western region, thereby enhancing the quality and efficiency of commercial banks' services to the real economy.

Technical and allocative efficiency of commercial banks in Ethiopia

Technical and allocative efficiency of commercial banks in Ethiopia

Constructing a robust data envelopment analysis model to evaluate the profitability efficiency of banks with financial loss

ABSTRACT This paper introduces a robust data envelopment analysis (DEA) model to address the limitations of traditional models in handling nonpositive data and applies it to measure the profitability efficiency of banks, including those facing financial losses. The proposed model offers several advantages over current approaches. The model is designed to resist the influence of extreme values and effectively handle variables with positive values for some banks and nonpositive values for others, can be applied under various returns-to-scale conditions and does not require any prior knowledge, overcomes the lack of translation invariance, considers nonradial input or output slack, and uses benchmark targets with economic interpretation. Numerical examples are provided to illustrate its effectiveness, and the results are compared with those obtained from commonly used methods, highlighting its superior performance in handling nonpositive data. Finally, the proposed method is applied to measure the profitability efficiency of commercial banks, demonstrating its practicality in real-world scenarios.

Can Green Finance Reform and Innovation Pilot Zones Promote the Operational Efficiency of Commercial Banks? — Empirical Research Based on 40 Commercial Banks in China

The Chinese government is placing significant emphasis on green development. From 2017 to 2021, the central and local governments in China established 9 green finance reform and innovation pilot zones in 6 provinces to explore the pillars of China’s green finance system. Although these zones and related policies have been proven advantageous for innovative manufacturing enterprises and environmental quality, the impact on commercial banks, pivotal players in China’s green finance landscape, has been understudied. This paper employs the DEA-Malmquist and DID models to investigate the impact of pilot zones on the operational efficiency of commercial banks. The results indicate that the establishment of pilot zones significantly improves banks’ operational efficiency, and the mechanisms are reducing non-performing loan rates and increasing green credit balance. In addition, state-owned banks have benefited more. Further research shows that the improvement mainly comes from increased pure technical efficiency, due to better management practices and resource utilisation. These findings can be used to evaluate the impact of the government’s green finance policy on the operation of commercial banks.

The Effects of Working Capital Management on Firms’ Efficiency: Case of Turkish and Zimbabwean Commercial Banks.

This research studies management of working capital and its impact on commercial bank efficiency in Zimbabwe and Turkey. The study examined the financial statements of 10 banks from each country between 2009 and 2022. The research evaluated performance of banks using return on asset (ROA) as well as return on equity (ROE) as efficiency indicators. Working capital was assessed through the current ratio, current ratio, and total cash ratio, while bank size and leverage were considered as control variables. Correlation analysis, estimation equations, and regression models were used to examine the data, which included pooled cross-sectional and time series data, using SPSS (version 20.0). The data demonstrated a favourable and substantial association between ROE and the current ratio, demonstrating that adequate management of working capital has a beneficial impact on the banks’ profitability. A negative correlation, in contrast, between current ratio and ROE was noted, implying a balance of profitability and liquidity. Furthermore, no statistically significant association was seen between cash payment ability, total cash ratio, and ROA. However, a significant negative correlation was identified between the current ratio and ROA. Comparing the two countries, Turkish banks demonstrate superior liquidity management, potentially attributed to their adherence to the Basel III reform guidelines. The study recommends that Zimbabwean banks adopt similar measures to enhance their competitiveness in the international banking sector. In conclusion, the research emphasises the significance of good management of working capital in maximising bank efficiency. The findings provide valuable insights for policymakers and practitioners in the banking industry, urging them to implement liquidity management strategies for sustained success.

The mediating role of technological vigilance between IT infrastructure and AIS efficiency

This study aimed to examine the mediating role of technological vigilance within commercial banks in Jordan in supporting the relationship between information technology (IT) infrastructure (hardware, software, network, security, maintenance, information quality, and interoperability) and Accounting Information Systems (AIS) efficiency. AMOS and Statistical Package of Social Science (SPSS) were used in order to screen and analyze the data collected from 161 financial and accounting managers within commercial banks in Jordan. The results indicated that technological vigilance mediates the relationship between IT infrastructure and AIS efficiency; it is based on the idea that the use of IT infrastructure, such as networks, hardware, and software to support business processes has a direct impact on the efficiency of AIS. Accordingly, this study recommends focusing on the role of IT infrastructure and the mediating role of technological vigilance in achieving AIS efficiency in Jordanian commercial banks. The originality of the study lies in its ability to address the role of IT infrastructure in increasing AIS efficiency, as well as its focus on the mediating role that technological vigilance. The study also has a novel contribution to the field by exploring the interconnectedness between technology, operational efficiency, and watchfulness. Through an in-depth analysis of empirical case studies, a deeper understanding of the interplay between these three variables was presented.

EVALUATION OF THE IMPACT OF FINANCIAL TECHNOLOGIES ON THE FINANCIAL EFFICIENCY OF COMMERCIAL BANKS

The topic of financial technologies (Fintech), which has attracted enormous interest in the last decade, has become one of the most promising niches that allow participants providing services in the payment market to improve the efficiency of financial activity systems. Financial industry players such as commercial banks have begun to pay special attention to the development of this new niche. In order to maintain or occupy higher market positions, they must take into account the potential of financial technologies and their possible exploitation by integrating new solutions into already functioning banking systems. This article aims to reveal the influence of financial technologies on the financial efficiency of commercial banks. After highlighting the importance of financial technologies for commercial banks in the theoretical part of the study, the analytical part examines the financial indicators of Lithuanian commercial banks (SEB, Swedbank, Šiaulių bankas, and Citadelė) in the period 2017–2021. Correlation and regression analysis will be used to determine the impact of financial technologies on the financial efficiency of commercial banks. The results of this study determines how financial technology impacts the financial performance of commercial banks.

Efficiency of Commercial Banks in India during Pre and Post E-Banking Period

Banking industry being the knowledge-intensive industry plays an important role in enhancing economic growth of the country. In this whimsical world of technology where Indian Commercial banks are facing intense competition both from domestic as well as international players, the working of this industry have changed drastically with the onset of e-banking period. Such technology-banking or e-banking era is a stimulant to enhance not only economic growth of the country but also efficiency of banks. In this context, this paper is an attempt to study the efficiency of commercial banks in India during pre and post banking period. Also, this study suggests policy recommendations for Indian banking industry to cope the inefficiency and face the competition boldly.

Examining the Impact of Loan Diversification Policy on the Operational Efficiency of Bank of Kigali and Ecobank Rwanda

To mitigate overall loan portfolio risk, commercial banks often turn to diversification strategies. However, the impact of such diversification remains contested among scholars. This study delved into the analysis of the Loan Diversification Policy's influence on the efficiency of Bank of Kigali and Ecobank Rwanda. Employing a mixed-methods approach— both qualitative and quantitative—the study encompassed 191 employees, with a sample size of 66 managers. Data collection utilized questionnaires and annual reports from the banks. Cronbach’s Alpha measured internal tool consistency, yielding a coefficient of 0.861. Analysis involved descriptive and correlational statistics, executed through Statistical Package for Social Sciences (SPSS), with findings presented via charts and tables. Regarding the first objective, among 66 respondents, reasons for risk in the loan portfolio varied: competition among banks (15.2%), global financial crisis (13.6%), currency fluctuation (9.1%), high lending rates (15.2%), loan recovery issues (13.6%), new regulations (12.1%), government policies (9.1%), and declining interest margins (12.1%). Concerning the second objective, factors influencing bank efficiency included education levels (16.7%), experience (22.7%), participation in education programs (19.7%), professional organization memberships (18.2%), training methods (21.2%), and supervision quality (1.5%). Regarding the third objective, the study revealed a significant correlation (99.3%) between the loan diversification policy and commercial bank efficiency, indicating a strong positive relationship. Keywords: Commercial banks, Loan portfolio, Diversification policy, High correlation, Management of banking institutions

Commercial banks listed on the Ho Chi Minh City stock exchange: An analysis of diversification, human capital, and performance

Both portfolio diversification and the resource-based view theories advocate for firms to engage in the diversification of their activities to mitigate risks and enhance operational efficiency. Nevertheless, the subject at hand is a matter of contention due to the existence of a perspective that advocates for the superiority of specialization over diversification. The objective of this study is to determine the relationship between income diversification, human capital, and the financial performance of Vietnamese commercial banks. Based on an analysis of data obtained from 15 commercial banks listed on the Ho Chi Minh Stock Exchange from 2013 to 2022. Panel data regression method is used. The results indicate that diversification does not exert a significant influence on the performance of banks. However, it is seen that human capital positively impacts bank performance, suggesting a favorable relationship between human capital and bank performance. According to this result, income diversification has not had an impact on the efficiency of Vietnamese commercial banks. On the contrary, human capital is a factor that positively and strongly affects the performance of Vietnamese commercial banks. The findings of this study indicate that some management implications may be considered to enhance the operational efficiency of Vietnamese commercial banks.

Impact of Merger on Efficiency of Commercial Banks: A Case Study

Impact of Merger on Efficiency of Commercial Banks: A Case Study

Heterogeneity and time-varying efficiency in the Ecuadorian banking sector. An output distance stochastic frontier approach

This paper estimates the efficiency of Ecuadorian commercial banks from 2007 to 2017, considering multiple inputs and outputs, several factors explaining inefficiency, technological unobserved heterogeneity, and time-varying efficiency. To do this, we used an output distance function stochastic frontier model in a Bayesian framework and considered the profitability approach. In general, the results show evidence of unobserved cross-bank heterogeneity and time-varying inefficiencies, the latter of which presented scores which were high and stable over time. One factor that significantly explains inefficiency is foreign ownership, however internal factors such operating profitability and Central Bank policy reserve requirements did not. Finally, estimated returns to scale show bimodality indicating the existence of two bank groups associated with decreasing and constant returns to scale.

Factors of Value Chain Affect Bank Efficiency

This paper aims to determine and estimate the factors in the value chain that affect the efficiency of state-owned commercial banks in Vietnam. The study employs a combination of qualitative techniques, such as conducting interviews with top executives, financial managers, chief accountants, and employee surveys, along with quantitative methods like ordinary least squares analysis. The outcomes reveal four critical segments within the value chain – the retail department, operation department, back office, and call center – all of which significantly influence the efficiency of the banks. Additionally, drawing upon value chain theory and Porter's model (1985), the author underscores the significance of implementing a robust value chain strategy. This strategic approach has the potential to substantially enhance the competitive advantages of state-owned commercial banks in Vietnam. Doi: 10.28991/ESJ-2023-07-06-010 Full Text: PDF

BANK EFFICIENCY AND GOVERNANCE: EVIDENCE FROM JOINT VENTURE AND FOREIGN COMMERCIAL BANKS IN VIETNAM

In this paper, we intend to examine the influence of national governance on the bank efficiency of joint venture and foreign commercial banks in Vietnam. Joint venture and foreign commercial banks have been instrumental in introducing new financial products to the Vietnamese market (e.g., mortgage services and medium-term certificates of deposit). At the same time, they have also penetrated the retail market through automobile and housing loans, and international credit card services.  We use the DEA double bootstrap method to develop a bank network function to evaluate bank efficiency. The findings from our random-effects model demonstrate that world governance indicators as proposed by the World Bank independently determine the bank efficiency of the joint venture and foreign commercial banks in Vietnam. There are important implications to be highlighted for policymakers and stakeholders of joint venture and foreign commercial banks and other types of banks in the banking industry elsewhere around the world.

Tác động của chính sách tiền tệ đến hiệu quả hoạt động của các ngân hàng thương mại tại Việt Nam

This study was conducted to examine the impact of the State Bank’s monetary policy on the efficiency of Vietnamese commercial banks. Specifically, how do changes in refinancing interest rates and money supply affect the efficiency of commercial banks? The results of the study on a sample of 25 Vietnamese banks during the period 2009-2021 using the 2-step SGMM regression method show that the impact of refinancing interest rates and money supply on the bank efficiency is not consistent. While refinancing interest rates have a positive impact on bank efficiency measured by ROA and ROE, money supply only shows an impact on ROA. An increase in refinancing interest rates along with tightening money supply can bring advantages to banks in their operations and vice versa. Based on these research results, bank managers in Vietnam may prefer a high interest rate environment.

Online Banking and Technical Efficiency of Commercial Banks in Kenya

Purpose: The financial sector is being revolutionized as a direct result of technological progress, with banks and other financial institutions embracing new technologies to better serve their customers online. Technological developments in the financial sector are simplifying access to financial services. The study set out to dissect the effects of Fintech on Kenya's commercial banking sector. The general objective was to establish the effect of online banking on technical efficiency of commercial banks in Kenya. The study was anchored on Theory of Constraint-Induced Innovation.
 Methodology: The entire study relied on collecting empirical data and evaluating hypothesis in a positivist way. A causal-comparative research design was used in this research. The study targeted population of Seventeen Kenyan commercial banks from the first and second tiers. The analysis relied on secondary sources of information. The gathered quantitative data was analyzed using both descriptive and inferential statistics. Numbers, medians, and standard deviations were used to characterize the data, and frequency distributions were used to determine the sample size. Models for analyzing correlations and regressions are inferential statistics. STATA was used for the data analysis.
 Findings: The study established that online banking has a positive and significant effect on technical efficiency of commercial banks in Kenya.
 Unique Contribution to Theory, Policy and Practice: The research showed that commercial banks in Kenya could benefit from investing more in their online banking systems to boost their technological efficiency.

Determinants of Efficiency of Commercial Banks in India After Global Crises

This study contributes to the bank efficiency literature by estimating the technical efficiency, pure efficiency, and scale efficiency of banks in four different ownership groups in India from 008-09 to 019-20, utilizing the DEA method and three alternative approaches to choosing inputs and outputs of banks-intermediation approach, value-added approach, and operating approach. It also uses the Tobit estimation procedure to identify the factors determining the variations in the technical efficiency of banks. Results indicate a high degree of inefficiency of several banks during the study period, and there is greater scope for improving their performances. Sizable scale inefficiency exists, and banks are likely to lose sizable output. The results also indicate that banks with a larger capital adequacy ratio, young banks, larger banks, or more profitable banks are more efficient. Foreign banks and nationalized banks are more efficient than private domestic banks. We hope that the findings of this study will be useful to international agencies and other stakeholders in evaluating and improving the performance of Indian banks.

Impact Digital Banking Development on the Business Efficiency: A Case Study of Commercial Banks in Vietnam

Objective: The article's goal is to explore the policy factors affecting the development of digital banking to improve the business efficiency of commercial banks and policy recommendations for developing digital banking services.   Method: The study applied qualitative and quantitative approaches to process data through SPSS 20.0 and Amos software. The authors surveyed 750 staffs working for 25 commercial banks in Vietnam. This study used descriptive statistical tools, measuring scales with Cronbach's Alpha for structural equation modeling (SEM).   Results: the article's value is to measure the policy factors affecting the development of digital banking to improve the business efficiency of commercial banks. From that,. The article's novelty has three key factors influencing the development of digital banking and business efficiency, with a significance of 1.0 percent.   Conclusions: The Fourth Industrial Revolution substantially impacted all aspects of life, and the outbreak of the Covid-19 pandemic worldwide catalyzed the demand for services. The digital platform has been increasing rapidly. As one of the fields that soon caught up with the change of technology, banks quickly approached, changed their business models, organized business, and provided innovative products and services to bring about innovative products and services. Finally, the study's original is to support policymakers and managers of banks in developing digital banking.

Analisis Efisiensi Bank Umum Persero Menggunakan Metode Data Envelopment Analysis (DEA)

The purpose of this study is to analyze the efficiency of state-owned commercial banks and to analyze their development. Where efficiency is a parameter in measuring performance for banks. The Data Envelopment Analysis approach was used in this study with a quantitative method. Where there are two models used, namely the VRS (Variable Return to Scale) model and the CRS (Constant Return to Scale) model. State-owned commercial banks are the sample in this study for the period 2019 to 2022. Capital, Third Party Funds (DPK), and operational costs are used as variable inputs. Meanwhile, credit is used as a variable output. Based on the results of the analysis, it shows that based on the VRS model, the efficiency of state-owned commercial banks was obtained in almost all years except in 2019. Furthermore, the results of the analysis using the CRS model, several banks obtained efficiency results and several banks obtained inefficiency results. Even based on the average efficiency that existed during the study period, all of them experienced inefficiency, it's just that the efficiency value was at 0.9. The difference in the results of the two models used is because the VRS model overrides the production scale factor, while the resulting CRS model value is Overall Technical Efficiency

Evaluation of Digital Banking Efficiency in Indonesian Banking Sector using Data Envelopment Analysis (DEA) Approach

The digital banking industry in Indonesia has experienced significant growth, driven by changing customer demands, technological advancements, and regulatory support. The digitalization of Indonesian banks aims to enhance cost efficiency. This research utilizes the Data Envelopment Analysis (DEA) method to measure the cost efficiency of Indonesian commercial banks. The research includes digital banks as business units and neo-banks, comparing their cost efficiency from 2012 to 2020, with digital banks and neo-banks generally operating more efficiently than non-digital banks. The findings highlight the significant impact of digital transformation on cost efficiency in the banking industry. Stakeholders, including banks and financial authorities, can utilize these insights to plan strategies, reduce operating costs, and enhance cost efficiency. Further research can explore additional factors, such as macroeconomic influences, and categorize commercial banks based on their core capital categories.