Improve Bank Efficiency Research Articles

The Effect Of Board Capital On The Efficiency Of Indonesian Commercial Banks In 2020-2022

This study aims to examine whether Board Capital factors have an effect on the efficiency of state-owned and private commercial banks in Indonesia. This study uses secondary data from annual reports and LinkedIn for 48 commercial banks in Indonesia for the period 2020-2022. The results of the study show that Education Capital does not have an effect on bank efficiency, Experience Capital has a negative effect, and Networking Capital has a positive effect. The significant control variables are NIM, Bank size, Bank age, and Pandemic year. Board of directors' networking becomes an important factor in improving bank efficiency in Indonesia.

Does Regulation Only Bite the Less Profitable? Evidence from the Too‐Big‐To‐Fail Reforms

AbstractWhat shapes banks' response to capital requirement reforms? While prereform capitalization is important in the short term, we posit that profitability is key in the medium term, as it underpins banks' capacity to build capital. We examine the impact of capital surcharges on systemically important banks. Through a novel application of textual analysis to identify when banks react, we show that less profitable banks contract when faced with higher requirements, especially if they are closer to the thresholds that determine their surcharges. Conversely, more profitable banks continue to expand, improving banking efficiency but raising concerns about concentration and exposure to tail risks.

A STUDY ON ATTITUDE OF CUSTOMERS TOWARDS ARTIFICIAL INTELLIGENCE IN BANKING IN TIRUNELVELI DISTRICT

With Artificial Intelligence technologies increasingly integrated into various banking functions such as customer service, fraud detection, and personalized financial planning, understanding customer perceptions becomes critical for effective implementation. Through a survey of 50 respondents, this research explores customer awareness, trust, and concerns regarding AI in banking. The findings indicate a generally positive attitude towards AI, with respondents appreciating its potential for improving banking efficiency and convenience. However, concerns about data privacy and the ethical implications of AI remain significant. The study concludes that while customers are receptive to AI, banks must address concerns through transparent practices and robust data security measures to build trust and ensure broader acceptance.

How does fintech affect bank efficiency in Taiwan?

This study investigates the impact of financial technology (fintech) on bank efficiency in Taiwan from 2007 to 2020, using parametric and non-parametric analyses. In the future, fintech is expected to play an important role in bank sustainability operations. The findings show that fintech-related initiatives affect bank efficiency. These results illustrate how fintech can help banks directly or indirectly improve their efficiency, leading to higher profits or lower costs. For instance, mobile payment systems, a fintech-related initiative, improve bank efficiency. However, this degree of improvement is not substantial. In general, the findings imply that fintech-related initiatives do not significantly improve bank efficiency, implying an IT "productivity paradox."

COVID-19, Digital Transformation of Banks, and Operational Capabilities of Commercial Banks

The development of financial technology has promoted the innovation and digital transformation of commercial banks. Through digital transformation, commercial banks can improve bank efficiency and operational capabilities. Through empirical analysis, this study explored the relationship between digital bank transformation and commercial bank operating capabilities and how COVID-19, bank categories, and enterprise life cycles affect the relationship between digital bank transformation and commercial bank operating capabilities. This study selected data from China’s commercial banks from 2011 to 2021 and used the regression method of fixed effects to conduct an empirical analysis. The research results show that the digital transformation of banks has improved the operational capabilities of commercial banks. Further analysis showed that the emergence of COVID-19 has negatively affected their relationship. At the same time, compared with rural commercial banks and commercial banks in the recession and phase-out periods, non-rural commercial banks and commercial banks in the growth and maturity stages play a more vital moderating role in the impact of the digital transformation of banks on the financial performance of commercial banks. The main research object of this study is Chinese commercial banks, and this study examines the results of banks’ digital transformation and enriches the research on digital transformation. At the same time, this study is helpful to investors who like investment banks and has good practical significance.

Deregulation, bank efficiency and economic cooperation across China–Taiwan Strait

This study investigates whether deregulation has affected bank efficiency in the ‘cross-strait’ relationship between China and Taiwan. I measure bank efficiency across three periods – after Taiwan and China joined the World Trade Organization, the global financial crisis, and the signing of the Economic Cooperation Framework Agreement (ECFA) – and show that Taiwanese banks were significantly more efficient than their Chinese counterparts. These results show that the ECFA platform has not improved bank efficiency and thus has failed to function effectively. This finding suggests that China and Taiwan should continue negotiating within the ECFA context to enhance cross-strait financial cooperation.

EXAMINING THE EFFECT OF NETWORKING ON ORGANIZATIONAL PERFORMANCE IN THE BANKING INDUSTRY: EVIDENCE FROM NIGERIA

This study was on the networking and organisational performance of deposit money banks in Nigeria. The purpose was to determine how networking capability influences organisational performance of deposit money banks in Nigeria. The design of the study was a survey and the population was 2,413 low, medium, and senior-level managers of five selected deposit money banks in Nigeria licensed by Central Bank of Nigeria (CBN) for commercial banking. The sample was 463 determined using Krejcie and Morgan (1970) formula in addition to an attrition rate of 40%. The study used the stratified proportionate random sampling technique. Primary data were collected using the structured validated questionnaire from the specified units of measurement with instruments assessed for reliability using the Cronbach alpha coefficient. Results demonstrated all constructs to be highly reliable, Cronbach’s alpha coefficients for the constructs ranged from 0.783 to 0.842. The response rate was 86.9%. Data collected were analyzed using multiple linear regression analysis. The finding revealed that networking through ATMs, branches, phones, and the Internet as introduced by Nigerian deposit money banks improved organisational performance (β = 0.139, t = 3.281, p < 0.05). The study recommended that It is also recommended that executive management should spend more on current technology and financial innovation. This will improve bank efficiency and cut expenses. Through financial innovations, the bank may expand its products and services, improving sales and bank performance.<p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/edu_01/0130/a.php" alt="Hit counter" /></p>

Does corporate social performance improve bank efficiency? Evidence from European banks

This paper analyses the impact of corporate social performance (CSP) on bank efficiency in a sample of 108 European listed banks across 21 countries over the period 2011–2019. Simar and Wilson’s two-stage approach (Simar and Wilson in J Econom 136:31–64, 2007) has been applied, specifically using data envelopment analysis (DEA) at the first stage to estimate efficiency scores and then truncated regression estimation with double-bootstrap to test the significance of the relationship between bank efficiency and CSP as well as its different dimensions. Our results suggest evidence of a U-shaped relationship between CSP and efficiency, indicating that banks with either high or low corporate social performance levels are the most efficient. Considering the isolated effect of environmental, social, and governance dimensions, the same conclusion can be drawn for the latter two, while the former does not appear to have any effect on a bank’s efficiency. Our work contributes to the existing literature by providing a holistic procedure for assessing CSP in terms of efficiency, allowing us to study the separate effect of each component on bank efficiency. Our results have strong implications for regulators, policymakers, bank managers and investors supporting the changes in the EU Regulatory Taxonomy that lead banks to align their activities and strategies with the Sustainable Development Goals.

HOW CAN BLOCKCHAIN REVOLUTIONIZE THE JORDANIAN BANKING SECTOR?

This article aims to explore blockchain, its applications, and its impact on banks in Jordan. The potential applications and improvements that blockchain might bring to the financial industry are astounding. Specifically, this study discussed the importance and possible areas of deploying blockchain technology in the banking sector of an emerging country with a fast-growing economy, namely Jordan, for different reasons. First, due to the shrinking interest-rate spread, Jordan's financial sector lacks long-term lending and unsecured loans. Second, many economic revolutions, such as the internet and banking innovations, have impacted the Jordanian banking sector. As a result, the banking sector must undergo significant transformation to increase performance and attain new levels of growth. Third, the underlying technology in clearing payment and credit bank information systems could be revolutionized by blockchains. Fourth, blockchain applications facilitate "obtain credit, unsecured loans" scenarios, improving banking efficiency. Finally, while blockchain has much appeal because it allows free and self-governing transfers, overall regulation and security for this decentralized system are still being created and agreed upon. We argue that for blockchain to change Jordan's financial system, legal frameworks must be in place to control banking transactions. This study explores the technology of blockchain, the emerging technology that powers Bitcoin and other cryptocurrencies. It highlights the features of the blockchain and shows why it could profoundly influence the entire banking sector in areas ranging from payments to settlements and identity services.

ICT as a Key Determinant of Efficiency: A Bootstrap-Censored Quantile Regression (BCQR) Analysis for Vietnamese Banks

There is evidence that ICT developments can improve bank efficiency and performance. Previous studies often employ data envelopment analysis (DEA) to first examine bank performance and then use a second-stage regression to explain the influences of other environmental factors, including ICT, on such efficiency. Since DEA efficiency scores are bounded between the (0, 1] intervals, Tobit and truncated regressions are commonly used in this stage. However, none has accounted for the skewness characteristic of DEA efficiency. This paper applied a bootstrap-censored quantile regression (BCQR) approach to triply account for the issues of a small sample (via bootstrap), bounded intervals (via censored regression), and skewness (via quantile regression) in DEA analysis. We empirically examined the efficiency and performance of 27 Vietnamese commercial banks in the 2007–2019 period. The efficiency scores derived from our first stage revealed that they are skewed and thus, justify the use of the BCQR in the second stage. The BCQR results further confirmed that ICT developments could enhance bank efficiency, which supports the recent policy to restructure the Vietnamese banking sector toward innovation and digitalization. We also examined the impacts of other factors such as bank ownership, credit risk, and bank size on efficiency.

Do mergers and acquisitions improve bank efficiency? Evidence from North Macedonia

This article focuses on the efficiency of commercial banks in North Macedonia in the period from 2007 to 2020. The main goal is to assess the relative efficiency of the banking sector as a whole, and more importantly, to evaluate and analyse the impact of mergers and acquisition (M&A) transactions on banks’ efficiency. For this reason, the leading nonparametric methodology Data Envelopment Analysis (DEA) has been employed, i.e., the window DEA model with two input and two output variables on a sample of 13 commercial banks. Based on balanced panel data from the banking sector of North Macedonia, the obtained results show a constant fall of efficiency of the whole banking sector, from 83.33% in 2007 to 70.06% in 2011 and 66.36% in 2020. The results of the M&A transactions case study analysis show that, in general, M&A transactions decrease banks' efficiency, i.e., they do not result in an efficiency increase. The contribution of the study is that it comprises the first study analysing the effects of banks' M&A on bank efficiency in the region of South-Eastern Europe with the application of DEA and thus, it provides valuable information for investors, bank management, M&A analysts, academic members and regulatory bodies.

Efficiency Analysis of Five Conventional Commercial Banks in Indonesia by Examining the Principles of Sustainable Finance

This research analyzes the efficiency of conventional commercial banks in Indonesia by examining the principles of sustainable finance. This research only examines 5 banks in Indonesia during 2019-2021 due to the availability of data obtained from the sustainability report. The efficiency scores in 2019-2021 will be calculated using the DEA method with an output-oriented Bankers-Charnes-Cooper (BCC) assumption or Variable Return to Scale (VRS) assumption and an intermediation approach. Third-party funds, other operating expenses, and energy efficiency are input variables used in this research. Credit and securities are the output variables. In general, the results of this research conclude that several banks in Indonesia have a DEA efficiency score equal to 1 or have worked efficiently and the bank that always works efficiently during 2019-2021 is BCA. The practical implications to improve bank efficiency for banks that are not yet efficient are to maximize the distribution of funds through credit and securities, then these banks also need to take advantage of technological advances.

Analysis on the efficiency of China's top ten joint-stock banks based on the super-efficiency DEA method

Banks are special types of economic and financial institutions that specialize in various currency and credit loan businesses. They have always been regarded as the most important part of a country's real economy. It has a major issue related to the national economy and people's livelihood. Production, operation and management activities and the healthy development of the financial industry are very inseparable from the coexistence of financial banks. Joint-stock banks are also a very important part of the bank. With the current rapid development of China's modern financial industry, the market for joint-stock banks The competition is becoming more and more fierce. Bank efficiency is an important indicator to evaluate the profitability and competitiveness of each bank. Efficiency evaluation is of great significance to the sustainable development of banks. Super-efficiency DEA is an important method to study the efficiency of companies. This paper uses the super-efficiency DEA method to study the efficiency of the top ten domestic joint-stock banks with scale efficiency indicators and technical efficiency indicators. This research shows that during the epidemic period, reducing operating costs is of great significance to improving bank efficiency, getting rid of the shackles of business outlets, financial innovation through the Internet and big data, and allowing customers to enjoy banking services anytime and anywhere has gradually become the goal of major listed banks.

Technological diffusion, banking efficiency and Solow's paradox: A frontier-based parametric and non-parametric analysis

Technological innovation is critical to secure long-term productivity benefits in any section of society. Investment in ICT is often seen as an imperative for improving banking efficiency. However, the unexpected failure of ICT in enhancing efficiency has unearthed the dilemma observed by Solow, who remarked, “You can see the computer age everywhere, except in productivity statistics”. We analyze the impact of IT investments on the technical and cost efficiency of 72 Indian commercial banks across 2008–2019 using stochastic frontier analysis with exogeneous inefficiency effects and a slacks-based measure of data envelopment analysis. We conclude that the sector has been able to leverage IT investments towards improving efficiency, thereby invalidating the claims of a productivity paradox and providing evidence that supports the birth of a new economy where IT can be viewed as a dynamic force that brings about changes in organizational design, allowing banks to achieve better efficiency levels.

Is capital conservation buffer or regulatory leverage better at improving bank efficiency? The case of an emerging market

Purpose This paper is motivated by the heated debates preceding the introduction of additional regulatory requirements of Basel III on capital conservation buffer (CCB) and regulatory leverage (RLEV) in banks of emerging markets. The paper aims to examine which policy ratio can improve bank efficiency (BE), in one of the most resilient banking settings in the Middle East and North Africa (MENA) region. Design/methodology/approach The analysis is performed on a sample of 13 banks for the period 2010–2018 in Egypt and proceeds in two steps. In the first step, the data envelopment analysis model is used to derive bank-specific efficiency scores. In the second step, BE scores are regressed on the two types of regulatory capital and a set of control variables. Findings The paper is motivated by regulatory debates on the viability of RLEV and CCB in enhancing BE. The results show that higher RLEV and CCB are associated with a reduction in BE and that RLEV is highly associated with BE compared to CCB. Hence, results are relevant to policymakers in designing measures for improving BE in emerging markets. Originality/value The findings contribute to a small but growing stream of research on capital adequacy in emerging markets. This study provides results on the viability of risk-based vs non-risk-based capital requirements. The findings are also relevant to bank regulators in similar emerging market settings in their efforts to introduce and phase in minimum leverage requirements according to Basel III.

Does fintech innovation improve bank efficiency? Evidence from China’s banking industry

This paper examines whether the development of the financial technology (fintech) industry affects cost efficiency and the technology adopted for China’s banking industry over the period 2003–2017. Fintech industry development indices are constructed using fintech enterprise-level data, and these indices measure the development extent of entire fintech industry and four sub-industries including (1) credit, deposit and capital–raising services, ​(2) payment, clearing and settlement services, (3) ​investment management services ​and ​(4) market support services. The relevant efficiency scores for Chinese banks under different ownership structures are measured by applying the stochastic metafrontier approach. The results show that state-owned commercial banks have the lowest cost efficiency and operate under inferior technology. When considering the influence of fintech development, fintech innovations not only improve the cost efficiency of banks, but also enhance the technology used by banks. This double beneficial effect is more significant in the case of market support service innovations.

Does Corporate Governance Enhance Bank Efficiency in Taiwan

The purpose of this study is to investigate the relationship between bank efficiency and corporate governance in Taiwan. It aims to explain the effects of ownership structure, institutional investors' structure and manager turnover. The empirical results provide weak evidence to support the proposition that independent directors can improve bank efficiency. This study broke down the structure of institutional investors and found that when a higher percentage of banks were owned by domestic corporations, the efficiency-augmentation hypothesis was supported, whereas when a higher percentage of banks were owned by domestic trust funds, the efficiency-abatement hypothesis was supported. This study also found that in the Taiwanese banking industry in general, top executives of poorly performing banks are not more likely to lose their jobs and that, sometimes, boards did not appoint top executives based on ability but rather tended to appoint them based on the personal preferences of family board members.

Financial Inclusion and Bank Efficiency in Indonesia

The aim of this study is to find out the effect of financial inclusion on bank efficiency in Indonesia. Data from 26 banks for the period of 2011 to 2016 is used to measure bank efficiency using Data Envelopment Analysis (DEA). While the data from the World Bank is used to calculate the ratio of outstanding loans of small and medium enterprises to total outstanding loans in banks to measure financial inclusion index. Panel data regression is done to analyze the effect and the result shows that financial inclusion has a positive and significant effect on bank efficiency where an increase in financial inclusion could improve bank efficiency. The result implies that the government must present a conducive financial environment for the implementation of the SNKI program that can improve financial inclusion and bank efficiency.

Funding structure and technical efficiency

Purpose The purpose of this paper is to examine the effect of funding structure on technical efficiency of banks in Ghana, between 2011 and 2016. Design/methodology/approach Employing the random-effect and the truncated panel data of 25 banks, the results present new evidence. Findings The findings reveal that Ghanaian banks are less technically efficient, as the average efficiency scores generated is below the threshold of 1. Furthermore, the results show that banks in Ghana finance their operations mainly with deposit source of funding. The results reveal a significantly positive relationship between funding structure and technical efficiency. However, internally generated source of funds was negatively linked with technical efficiency. This is not surprising because banks that rely on external funds attract higher costs than internally generated funds, and this puts pressure on managers to perform. The results are relevant to emerging economies when the authors use additional macroeconomic factors. Research limitations/implications Thus, a proportionally larger deposit base funding would typically lead to an overall increase in technical efficiency of banks in Ghana. Shareholders should put pressure on managers to plough back earnings in order to increase the use of internally generated funds, thus, increasing technical efficiency. Banks that are inefficient should make some adjustments to their weights of inputs and/or outputs combinations by following their benchmark banks (efficient banks) to improve their efficiency. Practical implications The results of this study have important implications for regulators, investors and policy makers, particularly an emerging economy. The implication of the study to investors is that investors should be able to identify an appropriate source of funds that can be used efficiently to maximize their wealth in emerging markets. It is important for regulators and managers of banks to improve technical efficiency by considering the role that macroeconomic and monetary environment play when identifying and using various sources of funds as a strategy to improve bank efficiency. Social implications Consequently, future research should investigate the impact of funding structure on technical efficiency for other regions and considering their interactions with institutional quality, macroeconomic factors and financial stability. Originality/value To the best of the authors’ knowledge, the study is the first to fulfill an urgent need to explore a robust approach of measuring technical efficiency and funding structure within the context of banks over six-year period, prompting insightful avenues to the survival, growth and performance of financiers in emerging economy.

Bank regulation and efficiency: Evidence from transition countries

Given the nascent nature of banking sectors in transition countries and their unique institutional settings, this paper documents the effects of regulation on the efficiency of banks using system GMM and dynamic panel quantile regressions for 21 transition countries for the period 2002–2014. Within the system GMM estimation the paper finds bank activity restrictions to be the only regulation improving banking efficiency in these countries. However, the dynamic panel quantile results show that the regulation has different effects at different quantiles. This study provides important policy implications related to banking regulation in transition economies.