Heterogeneity of technological regimes and banking efficiency in former socialist economies

Cost efficiency of banks in 20 former socialist emerging economies is analyzed using a latent class stochastic efficiency frontier model that explicitly accounts for unobserved differences in technological regimes due to the heterogeneity of economic environments in which the banks are operating. We find that banking systems in former socialist emerging economies are characterized by three distinct technological regimes. Based on the estimated efficiency scores we group the countries into three categories and provide an intuitive interpretation of these three regimes.     

Productivity and efficiency dynamics in Indian banking: An input distance function approach incorporating quality of inputs and outputs

Banking technology is typically characterized by multiple inputs and multiple outputs that are associated with various attributes, such as different types of deposits, loans, number of accounts, classes of employees and location of branches. These quality differentials in inputs and outputs are mostly ignored in empirical studies. These omissions make the practical value of productivity studies in organizations like banks questionable because quality is a key component of performance. This paper proposes using hedonic aggregator functions (as a tool of aggregating inputs and outputs with quality attributes) within an input distance function framework and analyzes the impact of banking deregulation on efficiency and total factor productivity (TFP) change in the Indian banking industry using panel data for the period 1996–2005. Empirical results indicate that banks have improved their efficiency (from 61% in 1996 to 72% in 2005) during the post‐deregulation period, and the gain in efficiency of state‐owned banks has surpassed that of private banks. Improvement in capital base, as indicated by increased capital adequacy ratio, played an important role in ushering efficiency gain. The return to scale estimate suggests that state‐owned banks are operating far above their efficient scale and cost savings can be obtained by reducing their size of operations. Overall, TFP growth was above 3.5% annually. Both technical progress and technical efficiency change consistently played an important role in shaping TFP growth. Copyright © 2010 John Wiley & Sons, Ltd.     

COVID-19 crisis and the efficiency of Indian banks: Have they weathered the storm?

The purpose of this study is to determine whether Indian banks were able to weather the COVID-19 storm. We estimate banks’ deposits-generating and operating efficiencies using a two-stage directional distance function-based network data envelopment analysis (DDF-NDEA) approach and seek to capture the immediate impact of COVID-19 on these efficiency measures by comparing their magnitudes in the pre-pandemic (2014/15–2019/20), just 1-year prior to the pandemic (2019/20), and during the pandemic year (2020/21) periods. The study looks at whether the impact of the COVID-19 pandemic was uniform across ownership types and size classes. The empirical findings suggest that the Indian banking system was resilient and withstood the immediate impact of the COVID-19 pandemic. During the study period, however, the large and medium-sized banks experienced some efficiency losses. By and large, regardless of bank group, banks have shown resilience to the shock of the global health pandemic and improvements in efficiency.     

基于DEA模型的我国商业银行效率的实证研究

以我国9家已上市的股份制商业银行为研究对象,基于各银行2006年的统计数据,运用数据包络分析方法,研究他们的投入产出效率值。并用该模型的测算结果与已有文献中2002年的银行效率排名作对比。经研究表明,股份制商业银行的效率已经有了很大改观,股份制改革对国有商业银行经营效率有一定的推动作用;政府也利用内部调整以及放松管制等手段,给予国有商业银行很大帮助。本研究的重要意义在于,为迅速有效得提高我国商业银行的经营效率,达到国际一流的银行业水平提供借鉴和参考。     

Joint estimation of technical efficiency and production risk for multi-output banks under a panel data cost frontier model

This article generalizes production risk from a single output production function to a multiple output cost frontier, which is able to examine input-oriented technical efficiencies and production risk simultaneously in the context of a panel data. Furthermore, the joint confidence interval estimates for technical efficiencies are constructed by means of multiple comparisons with the best approach. Whether taking production risk into account or not offers quite dissimilar implications in terms of the average technical efficiency measure and the identification of multiple efficient banks achieving the optimal cost frontier. It is suggested that inferences drawn on the basis of the confidence intervals of technical efficiency provide much more fruitful and insightful information than the point estimation alone. Bank specific risk parameters are found to be highly and positively correlated with fixed-effect estimates, implying that the more risk-averse a bank is, the more technically efficient it will be.

Non-parametric tests of productive efficiency with errors-in-variables

We develop a non-parametric test of productive efficiency that accounts for errors-in-variables, following the approach of Varian. [1985. Nonparametric analysis of optimizing behavior with measurement error. Journal of Econometrics 30(1/2), 445–458]. The test is based on the general Pareto–Koopmans notion of efficiency, and does not require price data. Statistical inference is based on the sampling distribution of the L_∞ norm of errors. The test statistic can be computed using a simple enumeration algorithm. The finite sample properties of the test are analyzed by means of a Monte Carlo simulation using real-world data of large EU commercial banks.     

Bank ownership and cost efficiency: New empirical evidence from Russia

This paper investigates the cost efficiency of Russian banks with regard to their heterogeneity in terms of ownership form, capitalization and asset structure. Using bank-level quarterly data over the period 2005–2013, we perform stochastic frontier analysis (SFA) and compute cost efficiency scores at the bank and bank group levels. We deduct from gross costs the negative revaluations of foreign currency items generated by official exchange rate dynamics rather than by managerial decisions. The results indicate that the core state banks, as distinct from other state-controlled banks, were nearly as efficient as private domestic banks during and after the crisis of 2008–2009. Foreign banks appear to be the least efficient market participants in terms of costs, which might reflect their lower (and decreasing over time) penetration of the Russian banking system. We further document that the group ranking by cost efficiency is not permanent over time and depends on the observed differences in bank capitalization and asset structure. We find that foreign banks gain cost efficiency when they lend more to the economy. Core state banks, conversely, lead in terms of cost efficiency when they lend less to the economy, which can result from political interference in their lending decisions in favor of unprofitable projects Private domestic banks that maintain a lower capitalization significantly outperform foreign banks and do not differ from the core state banks in this respect.     

商业银行运营特征的DEA估计研究

数据包络分析是一种评价决策单元相对效率的有效工具,商业银行是数据包络分析方法的重要应用领域。之前的文献一般都集中于对商业银行的技术效率评价进行研究,而本文对商业银行的技术效率、纯技术效率、规模效率、成本效率、投入配置效率、收益效率与产出配置效率的评价方法作了系统性的研究。     

Does financial regulation affect the profit efficiency and risk of banks? Evidence from China's commercial banks

The goal of financial regulation is to enable banks to improve liquidity and solvency. Stricter regulation may be good for bank stability, but not for bank efficiency. This research aims to examine whether banks have met the CBRC's standard of financial regulations and explores how the previously implemented financial regulations have affected bank efficiency and risk in the past. In addition, we also explored the trade-off relationship between efficiency and risk. Unlike other studies, this study used bank assets as a classification standard from the financial risk and differential regulatory perspective.The empirical results indicate that the CBRC regulates the provision coverage ratio and cost-to-income ratio, which seems relevant to large banks and the loan-to-deposit ratio, capital adequacy ratio, and leverage ratio, which seems relevant to small banks. The CBRC regulates the current ratio to reduce the risks of banks. Based on our empirical results, the current ratio did not affect the risks and led to different efficiency results between large and small banks. In an environment with asymmetric information, a bank decision-making is unobservable. The characteristics of financial regulation provide market clues if a bank is operating at the most efficiency and risk condition.     

Bank Cost Efficiency and Output Specification

There is a longstanding controversy over precisely what it is that banks produce. However, there is little evidence on the sensitivity of bank cost efficiency results when different output definitions are applied. This paper does exactly that. In particular, we compare nonparametric efficiency scores yielded by two output specifications, one mainly identified with the asset approach and the other which also considers deposits as output. Results show that distributions of efficiency scores, estimated nonparametrically by means of kernel smoothing, vary greatly. In addition, firms' positions relative to the mean change according to either output definition, and results do not remain constant over time.     

Implications of variant efficiency measures for policy evaluations in UK higher education

Policy goals in UK higher education encourage the publicly funded universities to become more-specialised and larger in size without compromising output quality. Efficiency gains are expected to flow from this increased specialisation in accordance with universities’ comparative research and teaching strengths. Mergers to reap further gains from economies of scale are also being actively encouraged. Given this scenario, the paper investigates whether best-practice efficiency measurement based on data envelopment analysis (DEA) provides empirical support for the current policy goals. It also assesses whether such support is dependent on the specific type of efficiency measure used in the DEA modelling. This assessment finds that a selection of (nine) commonly used, variant efficiency measures generally support the current policy goals. The paper also uses the principal-agent framework to explore the issues involved in using computed DEA-based efficiency scores for policy evaluations and possible funding guidance in UK higher education. This highlights empirically how policy-makers and universities can have very different preferences about which efficiency measure is to be used for policy evaluations and possible funding guidance.     

我国银行业市场结构、效率及绩效关系研究

文章以国际上较流行的数据包络方法为测度工具,利用由CCR模型衍变而来的VRS及NIRS效率模型,对我国商业银行1997、1999、2001、2003年等4年的技术效率、规模效率、纯技术效率进行测算。根据所测得的效率数据,对有效结构假说和结构行为绩效假说进行实证检验,结果显示,效率和市场集中度与银行绩效正相关,而市场份额则与绩效负相关,该结论表明这两个假说都不适合中国银行业市场。同时,我们必须充分重视银行效率的提高。     

Banking efficiency in South East Europe: Evidence for financial crises and the gap between new EU members and candidate countries

In this study we compare the cost efficiency of banks in ten South East European countries and find out how differences in efficiency are related to EU membership. The results reveal a statistically significant cost efficiency gap between EU and non-EU banking systems in the region, where on average EU banking systems tend to be more cost efficient than their non-EU counterparts. In contrast to other similar studies analyzing banking efficiency in South East European countries, we also run β-convergence and σ-convergence tests, as proposed in the literature. Based on these tests we can draw conclusions concerning the existence of a catching-up effect, since the detected cost efficiency gap is closing predominantly because of adjustments on the side of the less efficient banks. Additionally, we found that during the 2008 global financial crisis, the average cost efficiency scores of banks in the region improved, which could be explained by enhanced incentives of bank managers for intensified cost optimization in banks in crisis times. Our results suggest that the institutional adjustments in the non-EU countries should continue towards EU standards, as the EU banking systems tend to dominate in terms of measured cost efficiency.     

Are some Indian banks too large? An examination of size efficiency in Indian banking

In this paper we use data from the years 1997–2003 to evaluate the size efficiency, as distinct from scale efficiency, of Indian banks. Following Maindiratta [Maindiratta A (1990) J Econ 46:39–56] we consider a bank to be “too large” if breaking it up into a number of smaller units would result in a larger output bundle than what could be produced from the same input by a single bank. When this is the case, the bank is not size efficient. Our analysis shows that many of the banks are, indeed, too large in various years. We also find that often a bank is operating in the region of diminishing returns to scale but is not a candidate for break up.

A novel method for computing single output for DEA with application in hospital efficiency

There are two main methods for measuring the efficiency of decision-making units (DMUs): data envelopment analysis (DEA) and stochastic frontier analysis (SFA). Each of these methods has advantages and disadvantages. DEA is more popular in the literature due to its simplicity, as it does not require any pre-assumption and can be used for measuring the efficiency of DMUs with multiple inputs and multiple outputs, whereas SFA is a parametric approach that is applicable to multiple inputs and a single output. Since many applied studies feature multiple output variables, SFA cannot be used in such cases. In this research, a unique method to transform multiple outputs to a virtual single output is proposed. We are thus able to obtain efficiency scores from calculated virtual single output by the proposed method that are close (or even the same depending on targeted parameters at the expense of computation time and resources) to the efficiency scores obtained from multiple outputs of DEA. This will enable us to use SFA with a virtual single output. The proposed method is validated using a simulation study, and its usefulness is demonstrated with real application by using a hospital dataset from Turkey.     

An insight into the specification of the input-output set for DEA-based bank efficiency measurement

Data envelopment analysis (DEA) has become one of the most widely used instruments for measuring bank efficiency. However, its application encounters many problems, which is evidenced by continuous evolvements in the DEA method so far. Our paper addresses the pitfalls of DEA in the context of measuring bank efficiency, with focus on the specification of performance factors. We aim at examining whether the input-output specification for banks in DEA applications is in consistence with the criteria upon which banks make decisions. Four bank behaviour models which are most popularly employed to determine input and output factors in DEA studies—the intermediation approach, production approach, user cost approach and value added approach—are comprehensively discussed and reviewed. The comparative reflection on the bank behaviour models and the standard DEA models shows that the input-output related pitfalls of a DEA application are associated with its implicitly fixed preference structure, flexible weight determination and limited explanatory power. Due to the pitfalls, the conventional DEA models may fail to capture bank behaviours. In such cases, DEA results can hardly reflect the performance in its true sense, i.e. how banks perform against the goals that they decide to pursue. The findings suggest focusing on (DEA-based) performance measurement from a goal-oriented perspective, i.e. from the point of view of multi criteria decision making.     

Hyperbolic Efficiency and Parametric Distance Functions: With Application to Spanish Savings Banks

Distance functions are gaining relevance as alternative representations of production technologies, with growing numbers of empirical applications being made in the productivity and efficiency field. Distance functions were initially defined on the input or output production possibility sets by Shephard (1953, 1970) and extended to a graph representation of the technology by Färe, Grosskopf and Lovell (1985) through their graph hyperbolic distance function. Since then, different techniques such as non parametric-DEA and parametric-SFA have been used to calculate these distance functions. However, in the latter case we know of no study in which the restriction to input or output orientation has been relaxed. What we propose is to overcome such restrictiveness on dimensionality by defining and estimating a parametric hyperbolic distance function which simultaneously allows for the maximum equiproportionate expansion of outputs and reduction of inputs. In particular, we introduce a translog hyperbolic specification that complies with the conventional properties that the hyperbolic distance function satisfies. Finally, to illustrate its applicability in efficiency analysis we implement it using a data set of Spanish savings banks.     

博弈分析框架下的供应链应收账款融资研究

如何解决中小企业融资难问题,一直困扰着理论界和实务界。供应链金融概念的提出和发展,为中小企业融资难问题提供了解决办法。作为供应链金融的融资工具之一,应收账款融资由于在操作上的快捷和简便,受到众多中小企业和银行的青睐。文章从博弈论的角度,分析了核心企业、中小企业供应商、银行三方在应收账款融资过程中的决策。通过分析可以得出,核心企业从自身的经营稳定性和利益出发,会选择为中小企业应收账款融资提供担保。同时,银行为了扩展自身业务,提高资产收益,会接受中小企业提出的应收账款融资请求。核心企业、中小企业、银行之间的博弈达到帕累托最优。     

Bank efficiency and access to credit: International evidence

This paper examines the impact of bank efficiency on access to credit. We test the hypothesis that higher bank efficiency, meaning a better ability of banks to operate at lower costs, favors access to credit for firms. To this end, we perform a cross-country analysis with firm-level data on access to credit and bank-level data to compute bank efficiency, using a sample of about 54,000 firms from 76 countries. We find that greater bank efficiency improves access to credit for firms. The beneficial impact of bank efficiency to alleviate credit constraints takes place through the demand channel by reducing borrower discouragement to apply for a loan. Whereas the positive impact of bank efficiency on credit access is observed for firms of all sizes, the effect tends to be more pronounced in countries with a better economic and institutional framework. Our results therefore support policies favouring bank efficiency to enhance access to credit.     

Cost efficiency of the banking industry and unilateral euroisation: A stochastic frontier approach in Serbia and Montenegro

This paper aims at investigating the differences in cost efficiency of the banking industry in Serbia and Montenegro over the period 2005–2012. These two countries operated under a common monetary regime until 1999 and followed two different monetary regimes thereafter: unilateral euroisation in Montenegro and monetary independence in Serbia. A stochastic frontier approach incorporating bank-specific and country-related variables is used to analyze cost efficiency in the banking sectors of Serbia and Montenegro. The analysis shows that a bank operating at given conditions in terms of ownership, market and other specific characteristics presents significantly higher cost efficiency if it operates in Montenegro rather than in Serbia. We argue that this result may relate to the choice of unilateral euroisation made by Montenegro. It is also shown that foreign-owned banks, higher capitalized banks and banks with lower non-performing loans operate at higher cost efficiency.