Cost efficiency and the effect of mergers on the Taiwanese banking industry

This study addresses the cost efficiency, economies of scale and scope of the Taiwanese banking industry, specifically focusing on how bank mergers affect cost efficiency. Adopting stochastic frontier analysis, we employ a translog cost function for efficiency estimation. Composite error terms are used to account for managerial inefficiency and environmental effects. Empirical results suggest that economies of scale and scope exist at small and medium-sized banks. Meanwhile, government-owned or -controlled banks are the most cost efficient. Non-performing loans increase the inefficiency of the banking sector by just under 10 per cent. Further analysis reveals that bank merger activity is positively related to cost efficiency. Mergers can enhance cost efficiency, even though the number of bank employees does not decline. The banks involved in mergers are generally small and were established after the banking sector was deregulated.     

Bank Performance and Credit Availability in the Bulgarian Banking Sector, 1997-2001

Abstract

The 1997 financial crisis wiped out 30% of the Bulgarian banking sector and created severe strains on corporations. With the establishment of the currency board in 1997 and the new Banking Law, which set the legal framework for proper bank supervision, major Bulgarian banks were rapidly privatized through sales to foreigners, now controlling around 80% of bank assets. Since 1997, the Bulgarian banking sector has recovered from the crisis by improving its profitability and efficiency and adopted a legal framework compatible with the European Union standards. Based on a regression analysis of bank balance sheets and income statements, this paper shows that low level of credit volume during 1997-1999 derived from banks' cautious stance towards credit making reflecting both the ongoing risks in the real sector, and the stringent new banking regulations. Large banks, however, benefited from scale economies in improving profitability in the same period.     

Role of off-balance sheet operations on bank scale economies: Evidence from China's banking sector

This paper investigates product-specific scale economies of banks with respect to off-balance sheet operations. The cost benefits from the non-separability of outputs available to banks that imply the role of OBS activities on bank scale economies are also examined. We further test whether the role of OBS operations on bank scale economies changes across heterogeneous banks. Results suggest that banks can realize more scale economies by increasing OBS operations and that scale economies can be reaped particularly for non-state-owned banks. Therefore, diversification and deregulation should be included in the policy agenda for the subsequent marketization reform of China's banking sector.     

Are Foreign Banks Better Performers Than Domestic Counterparts? Examining the Financialization Hypothesis in Mexico

This article analyzes the relationship between “financialization” and the performance of credit institutions in Mexico over the period 1999–2013. On average, foreign banks have higher cost-to-income ratio and return on assets than domestically owned banks. Non-interest income to gross revenue positively contributes to foreign bank profits, which highlights income other than conventional banking transactions. When considering references in the literature to non-interest income as a proxy for financialization, our results imply that domestic banks are more dependent on traditional lending, such as interest-earning assets, whereas foreign banks seem to engage in greater diversification to support profitability. Overall, the banking system reveals tendencies (“financialization”) that can possibly work against credit facilitation in Mexico.     

Efficiency of service delivery systems in large commercial banks

This article provides novel empirical evidence on the cross-sectional variation of the productive efficiency of large banks relative to their service delivery systems. The analysis is conducted using data drawn from a sample of 118 large U.S. commercial banks for the years 1989 through 1991. The analysis reveals that centralized service delivery systems increase bank costs significantly. In no case was it found that centralized service delivery systems reduce costs, as is often envisioned by proponents of centralization. It is also found that centralized back-office operations tend to reduce costs significantly and are consistent with the existence of scale economies in bank back-office operations. © 1995 John Wiley & Sons, Inc.     

Dynamics of intellectual capitals and bank efficiency in India

This article attempts to examine the impact of intellectual capitals and its sub-components on the bank’s efficiency parameters for 38 listed Indian banks within multivariate panel data framework during the period from 2004–2005 to 2015–2016. The study uses the non-parametric Data Envelopment Analysis approach to estimate technical, pure technical and scale efficiency in the first stage, followed by computing Value Added Intellectual Capital and Modified Value Added Intellectual Capital as an indicator for intellectual capital performance. Finally, Tobit regression results suggest that intellectual capitals have statistically significant and positive but very low impact on all the three efficiency scores. At the sub-component level, only human capital efficiency has a significant impact with low value on the all three efficiency measures. Bank size and leverage are also found to be significant drivers of bank efficiency as well. Thus, the study’s findings support higher investment in intellectual capitals in order to further improve the banking efficiency and value creation in India by adopting appropriate policy by management for proper input allocations, particularly human capital and capital employed in coming years.     

Off-balance sheet activities and cost inefficiency in Taiwan's Banks

In this study, we adopt a stochastic cost frontier method to investigate the influence of off-balance sheet (OBS) activities on the cost efficiency of Taiwan's banks. We estimate and compare cost inefficiency with or without OBS outputs of 46 Taiwanese commercial banks during the period, 1998 through 2001. The conclusions of this empirical study are as follows. First, omitting off-balance sheet outputs in estimating the cost frontier function of banks results in an underestimation of bank efficiency by approximately 5 per cent. Second, large banks are associated with a higher cost efficiency and have an increased ability to develop OBS activities. This is consistent with Taiwan's regulatory policies, which focus on promoting efficiency in the banking industry of emerging markets. Banks with higher employee productivity are also more cost efficient. Finally, we observe evidence of economies of scale in both models with or without OBS specification in Taiwan's bank industry. Economies of scope between loans and OBS outputs are also observed.     

Diversification,efficiency and risk of banks: Evidence from emerging economies

This paper examines the impact of business diversification of banks on their risk, with efficiency taken into consideration as a conduit. Using bank-level data from more than 1000 commercial banks in 39 emerging economies during the period of 2000–2016, we find that increased business diversification exerts two competing effects on bank risk. The direct effect of increased diversification bolsters the stability of banks, but it is offset by the indirect effect whereby lowered efficiency, which is resulted from higher diversification, increases the riskiness of banks. Thus, the overall benefits from bank business diversification on bank stability rely on the trade-off of the two competing forces.     

Technical Efficiency of the Ghanaian Banking Industry and the Effects of the Entry of Foreign Banks

The effects of the entry of foreign banks and changes in bank concentration on the technical efficiency of domestic banks in Ghana over the period 2000–2008 is analyzed. Technical efficiency scores were obtained by the Data Envelopment Analysis. Then, the Tobit regression was used to analyze the impact of hypothesized explanatory variables on bank efficiency. Foreign bank share of total industry assets was used to proxy the impact of foreign banks. The findings suggest that efficiency of domestic banks has been positively affected by the entry of foreign banks and reduction in concentration. Thus, the central bank's policy of liberalizing the banking sector appears to be well placed.     

Efficiency in the Greek Banking Industry: A Comparison of Foreign and Domestic Banks

This study uses a sample of foreign and domestic banks operating in Greece during 1999–2004 to examine the impact of ownership on efficiency. We estimate an input oriented data envelopment analysis (DEA) model under variable returns to scale with inputs and outputs selected on the basis of a profit‐oriented approach. The results indicate an average pure technical efficiency equal to 0.7325 showing that the banks in sample could improve their efficiency by 26.75%. Over the same period, scale efficiency was equal to 0.6830. The comparison of the efficiency scores by group of ownership shows that domestic banks have higher pure technical efficiency and lower scale efficiency; however, the differences are not statistically significant. A DEA window‐analysis confirms the results of the cross‐section estimations. We also estimate a Tobit regression model but consistent with the univariate results we find no evidence to support the argument that ownership has a statistically significant impact on efficiency.     

Efficiency of multinational banks: Impacts of geographic and product loci

This paper explores geographic diversification strategies’ impact on multinational banks’ operational performance within the context of research on globalization and regionalization. We employ a sample of the 49 largest banks from 16 European countries from 2011 to 2018 and proxy operational performance by technical efficiency. We find the impact of geographic diversification on operational performance depends on the locus of geographic diversification—home-regional vs. inter-regional—and the interplay between geographic diversification and banks’ functional focus. More specifically, home-regional diversification together with a concentration on non-interest income-generating activities, including fee and commission and trading income, worsens performance, and diversification across regions alongside a focus on non-interest income-generating activities improves performance. Distinct product characteristics’ ability to facilitate different regional dispersions has important managerial implications for enhancing the success of geographic diversification strategies, a central but unresolved issue in global banking.     

全能银行范围经济的实证分析

从实证角度分析全能银行范围经济的存在。通过收入增长模型实证并回归检验了全能银行的范围经济特性,并计量出其范围经济系数,得到全能银行存在范围经济的有力证据。实践中对全球著名五家全能银行进行回归分析,并拟合中国自己的全能银行进行回归验证,得到拟合程度非常高的回归检验结果。由此得出结论:中国是可以发展自己的全能银行的,不仅具有现实基础且可产生显著的范围经济。     

Stress Testing Exposure of Banks to Sectors of the Ghanaian Economy

The capacity of Ghanaian banks to absorb large but plausible losses resulting from concentration of individual bank loan portfolios in sectors of the Ghanaian economy is investigated. Stress scenarios consist of worsening of banks’ impaired loan charges by one, two and three standard deviations of the industry’s recent distribution of non-performing loans. Findings reveal that the capital adequacy ratios of many banks would have been negatively impacted, some to the point of becoming insolvent. It is argued that, though these would be micro-prudential breaches, they are of such magnitude as to have economy-wide repercussions. Thus, bank loan portfolios are too concentrated.     

Does Regulation in Credit,Labour and Business Matter for Bank Performance in the EU-10 Economies?

Cost efficiency scores for banks in ten new EU member countries of Central and Eastern Europe are estimated using a parametric approach (data envelopment analysis) for the period prior to and immediately following their accession (2000–2010). These are then used in both fixed effects and dynamic panels to estimate the impact of regulation on bank specific efficiency in the transition economies of the EU. Using the Fraser Index of Economic Freedom (Gwartney, Hall, and Lawson 2012) we find that, among all the indices of economic freedom, the composite regulation index that includes regulation in credit, labour and business has more importance for the banking sector as results suggest a positive and statistically significant impact on bank efficiency. By decomposing the regulation index into its three components (credit, business and labour regulation) we find that strict labour regulation is associated with lower bank cost efficiency while certain aspects of credit regulation such as foreign ownership and competition as well as private ownership are significantly associated with improved efficiency. The dynamic panel vector autoregression (VAR) results using impulse response functions and variance decomposition further support the validity of these results. These findings are valuable for both academics and policy makers in their attempts to understand the drivers of bank efficiency.     

Bootstrapped Malmquist indices of Australian airports

This study uses the Malmquist bootstrapped methodology to assess the extent of productivity, efficiency, scale and technological changes at the major Australian airports. The analysis focuses on the post-privatisation period of Australian airports, using panel data on three outputs and three inputs. Results show that most Australian airports have experienced significant total factor productivity increase between 2002 and 2007, while few airports have recorded productivity and efficiency decline over the same period. Using a bootstrapped second-stage regression, the results also highlight the direct impact of environmental factors such as market share and airport hub on the productivity variations between airports. Other potentially affecting factors are: privatisation, oil price increase and price regulation.     

金融“脱媒”现象下的商业银行经营策略

本文通过分析美国的实际情况发现，随着资本市场的发展及多样化投资工具的日益普遍，商业银行的经营业绩并没有因为传统业务被挤占而一蹶不振，反而开创出了新的盈利空间。与资本市场形成了一种良性互动的发展态势。共同促进整个经济体系的持续增长。这全归功于美国商业银行的法人治理结构、业务运行模式及利润来源发生了根本性的转变。因而，对于处于变革中的中国商业银行而言。面临金融”脱媒”的影响。应该改革现有的产权制度，成立金融控股公司，转变业务运行模式及增加非利息收入来源。     

The impact of scale effects on the prevailing internet-based banking model in the US

Internet-based banks use a technology-intensive production process that may benefit from scale effects as they grow larger. This article analyzes whether the predominant Internet-primary bank in the USA generates technology-based economies of scale in the period 2002–2010. There is evidence of both favorable and adverse technology-based scale effects. As the leading Internet-primary bank gets larger, the financial performance gap with traditional banks shrinks while some of its critical competitive advantages wear down. The results suggest that unless the prevailing Internet-primary bank preserves the distinctive advantages of the Internet-based business model as it improves financial performance, it might end up converging with its branching competitors.     

Efficiency,scale and scope economies in the Ukrainian banking sector in 1998

This paper evaluates the current development of the Ukrainian banking system. The research was concentrated on the evaluation of cost and profit efficiency and scale and scope economies for 79 from 168 Ukrainian commercial banks in 1998. There is evidence that small banks operate more efficiently in cost terms but are less efficient in profit terms and furthermore, there is a substantial difference in scale economies between small and large banks. Large banks show significant diseconomies of scale while small ones show significant scale economies. This result could suggest that current technology in the financial sector does not allow efficient growth and concentration of the financial sector in Ukraine.     

SMEs’ Financing and Banks’ Profitability: A “Good Date” for Banks in Ghana?

Small and medium enterprises (SMEs) are the core of most economies and are a major source of economic growth. In recent times, banks have been actively involved in the financing of SMEs through the provision of loans to this sector. This paper investigates the impact of SMEs financing on banks’ profitability in Ghana. The study employed the fixed effect model as the main regression tool. The study result reveals that SMEs significantly contribute to banks’ profitability in Ghana. Interestingly, transaction cost in administering SME loans was insignificant in all the models. Higher inflation reduces the real value of the loan and erodes the interest returns on the total credit to the SMEs. Conversely, growth of GDP enhances the growth of the bank profit.     

银行业收入结构:美国、德国和中国的一项比较研究

运用均值-标准差分析方法,本文对美国、德国银行业及其代表性银行近几十年的利息收入、非利息收入及非利息收入占比数据,尤其是金融危机以来的数据进行了实证分析,对其背后的制度原因进行了研究。本文发现,国际银行业非利息收入占比都经历了持续增长过程,这期间投资银行业务收入在非利息收入中的占比不断上升;增加非利息收入占比可以提升商业银行的业绩,但并不能降低银行的经营风险,因为非利息收入并不比净利息收入更稳定。结合中国银行业收入结构的现状及特征,本文从中总结了相应的启示。