Information Frictions in Uncertain Regulatory Environments: Evidence from U.S. Commercial Banks

Information frictions between firms and regulators are typically seen as a means by which firms evade enforcement. In contrast, we argue that information frictions between firms and regulators can reduce the efficiency of firms’ compliance efforts when the interpretation of regulatory standards is uncertain. We exploit plausibly exogenous variation in distance between firms and their regulators to demonstrate this for a panel of community banks in the US. We find that banks located at greater distance from regulatory field offices face significantly higher administrative costs, at a rate of 20% of administrative costs per hour of travel time. These differences do not come with reduced compliance, are not driven by endogenous regulator choice, and are stable over time. Further, the costs borne by distant firms are negatively related to the scale of the jurisdiction in which they operate, suggesting that information spillovers between firms limit uncertainty about regulatory expectations.     

Non-parametric, unconditional quantile estimation for efficiency analysis with an application to Federal Reserve check processing operations

This paper examines the technical efficiency of US Federal Reserve check processing offices over 1980–2003. We extend results from Park et al. [Park, B., Simar, L., Weiner, C., 2000. FDH efficiency scores from a stochastic point of view. Econometric Theory 16, 855–877] and Daouia and Simar [Daouia, A., Simar, L., 2007. Nonparametric efficiency analysis: a multivariate conditional quantile approach. Journal of Econometrics 140, 375–400] to develop an unconditional, hyperbolic, α-quantile estimator of efficiency. Our new estimator is fully non-parametric and robust with respect to outliers; when used to estimate distance to quantiles lying close to the full frontier, it is strongly consistent and converges at rate root-n, thus avoiding the curse of dimensionality that plagues data envelopment analysis (DEA) estimators. Our methods could be used by policymakers to compare inefficiency levels across offices or by managers of individual offices to identify peer offices.     

Unemployment and employment offices’ efficiency: What can be done?

Regional employment offices provide placement services to job-seekers and employers and organize active labor market programs. In this paper, we carry out a quantitative evaluation of the employment offices’ performance in Switzerland based on production efficiency measures. We use Data Envelopment Analysis (DEA) to estimate the performance of all employment offices and then account for factors in the local operating environment that are outside managerial control. This approach, and the ranking of employment offices, may easily be interpreted by policymakers and provides guidelines for raising the efficiency of the public employment service. Our findings suggest that there is considerable room for improved efficiency in employment service, which could lead to a lower level of structural unemployment. We also find that differences in the external operating environment have a significant influence upon the efficiency of employment offices.     

Long-term efficiency of public service provision in a context of budget restrictions. An application to the education sector

This paper proposes an extension of the non-parametric long-term evaluation of efficiency, the conditional panel data DEA model, which takes into account the panel structure of the data and, at the same time, incorporates the role of contextual factors in the estimations. Its application to the education sector for the period analyzed (2009–2014) shows the utility of this method, since it obtains more representative efficiency scores for the complete time-period, is more robust to external shocks, and allows improvements to the decision-making process in the allocation of the budget available for the public education sector. The results are clear and present an evolution towards the convergence of the efficiency scores, precisely in a time period when hard budget constraints severely reduced the resources available for public schools.     

Dynamic efficiency evaluation of Italian judicial system using DEA based Malmquist productivity indexes

The aim of this study is the empirical analysis of the Italian judicial system, measuring its efficiency and productivity. For this purpose, in details, the Data Envelopment Analysis (DEA) and Malmquist indexes were used, since they are recognized by the current literature as successful techniques to evaluate the performance of decision making units, namely the courts of law in our field of application.The statistical data on the administration of justice in Italy, as reported in Dossier n. 11 May 2013, Senate Research Services, Research Office on Institutional Issues, Justice and Culture, XVII legislature, shows that the efficiency crisis of justice in Italy began in the 1970s of the last century, aggravating during the ‘80s, and reaching its most critical moment during the 1990s. Several studies emphasize the relevance of the effects of inefficiency upon the judicial system on the credit and financial markets.The present analysis, using data that covers a wide time span and is disaggregated at district level, has set the goal of measuring the efficiency of the individual Italian judicial offices while assessing the progress of productivity in its components, by the means of technological progress and scale efficiency. The efficiency analysis that was carried out transcends the aspect of judicial taxation, considering how the passage of time has impacted on judicial efficiency.Considering the judges and judicial administration employed, in the new, pending and finished cases during the years ranging from 2011 to 2016, the results highlighted a distinct heterogeneity among courts, depending on their geographical location. The five-year period that was considered, included the years in which the judicial geographical distribution reform entered into force, so to better comprehend how this complex reform influenced the recovery of efficiency of the judicial offices. Furthermore, by breaking down the index into change in efficiency and change in technology, this work offers a further glimpse into judiciary organization. The application of combined DEA method and Malmquist indexes for evaluating court efficiency in a large time frame showed very interesting and useful results, relevant for judicial administration.     

Rent-seeking,promotion pressure and green economic efficiency: Evidence from China

Focusing on the quality and sustainability of urban economic development and using a panel dataset of 263 cities in China from 2004 to 2015, this paper regards each city as a production unit and uses the Epsilon-Based Measure approach to measure green economic efficiency by innovatively regarding labor, capital, land and energy as input factors, GDP as a desirable output, and environmental pollution emissions and land finance as undesirable outputs. Further, this paper examines the effect of rent-seeking on green economic efficiency with a fixed effects model and explores the role of promotion pressure in the relationship between rent-seeking and green economic efficiency with a panel threshold model. Our study finds that: (1) Rent-seeking exerts a significant negative impact on green economic efficiency. (2) Compared to areas of higher promotion pressure, the negative effect of rent-seeking on green economic efficiency is greater in areas facing lower promotion pressure. (3) The relationship among promotion pressure, rent-seeking and green economic efficiency differs in areas facing different “green” promotion pressure.     

Indirect inference for dynamic panel models

Maximum likelihood (ML) estimation of the autoregressive parameter of a dynamic panel data model with fixed effects is inconsistent under fixed time series sample size and large cross section sample size asymptotics. This paper proposes a general, computationally inexpensive method of bias reduction that is based on indirect inference, shows unbiasedness and analyzes efficiency. Monte Carlo studies show that our procedure achieves substantial bias reductions with only mild increases in variance, thereby substantially reducing root mean square errors. The method is compared with certain consistent estimators and is shown to have superior finite sample properties to the generalized method of moment (GMM) and the bias-corrected ML estimator.     

Applying efficiency measurement techniques to the measurement of productivity change

Deterministic frontier analysis (DFA), stochastic frontier analysis (SFA), and data envelopment analysis (DEA) are alternative analytical techniques designed to measure the efficiency of producers. All three techniques were originally developed within a cross-sectional context, in which the objective is to compare the efficiencies of producers. More recently all three techniques have been extended for use in a panel data context. In the latter context it is possible to measure productivity change, and to decompose measured productivity change into its sources, one of which is efficiency change. However when efficiency measurement techniques, particularly SFA, have been applied to panel data, it has infrequently been made clear what the objective of the analysis is: the measurement of efficiency, which may vary through time as well as across producers, or the measurement and decomposition of productivity change. In this paper I explore the use of each technique in a panel data context. I find DFA and DEA to have achieved a more satisfactory reorientation toward productivity measurement than SFA has.     

A Note on Fixed Costs and the Profitability of Depository Intermediaries

In this paper we consider some factors which are of potential importance in the debate concerning the sources of performance for intermediaries. Using data from depository institutions (banks and savings and loans), we find that the distributional intensity (provided by standardized number of offices in a market) is consistently important in explaining cross- sectional profitability. This result implies that the number of offices in a market is at least as important as more traditional measures of efficiency and concentration in determining returns in this sector of the financial services industry. Indeed, when pooled data are used, there is a strong quadratic relationship between return on assets and the number of offices in a market. We show that this relationship can be viewed as coming from spatially differentiated markets as opposed to collusion or efficiency per se. Finally, we provide evidence that results concerning the rule of efficiency versus market concentration are themselves sensitive to the implicit assumption that there are no close substitutes for the services provided by a sub-set of the industry. In particular, results from ‘pooled’ bank and thrift data often provide conclusions which are different from those which include only banks. © 1997 John Wiley & Sons Ltd.     

Technical efficiency of Swedish employment offices

This paper studies technical efficiency for Swedish employment offices between 2004 and 2010. Efficiency is computed using a semi-dynamic DEA-framework. On the input side we include a measure of input quality and we also control for services that are carried out by private contractors. On the output side we are using both intermediate and final outputs. The motivation for using an intermediate output is to take into account the fact that employment offices might have strengthen the possibility for unemployed individuals that remain unemployed to get a job in the forthcoming year. The study identifies an average yearly inefficiency between 7 and 10 percent. It is also observed that the inefficiency is unevenly distributed. To make employment offices more efficient this uneven distribution needs to be considered, otherwise efforts to improve efficiency might instead result in increased inefficiency.     

Slack-adjusted efficiency measures and ranking of efficient units

In non-parametric methods many units are calculated as efficient. The article suggests a method for ranking efficient units, not by their efficiency, but by importance as benchmarks for the inefficient units, in contrast to earlier suggestions in the literature which rank units high if they are specialized. However, the total potentials for improvement frequently remain unrevealed by calculating radial efficiency measures of the Farrell type only. The article therefore first develops efficiency measures that explicitly extend the radial measures to include slacks. The new measures are applied to a typical multidimensional small-sample data set for Norwegian employment offices.     

Efficiency Measurement With Unbalanced Panel Data: Evidence from Tunisian Textile,Clothing and Leather Industries

This paper is concerned with the estimation of stochastic frontier production functions with unbalanced panel data when unobservable firm efficiency levels are related to explanatory variables. We use the weighted-means Instrumental Variables method acknowledged to R. Gardner (1998) which is a modification of the Hausman-Taylor (1981) procedure adapted for unbalanced panel data. The estimation method is used to examine technical efficiency in Tunisian textile, clothing and leather (TCL) industries during the period 1983–1994. Further, we assume a Translog production frontier where input uses are expressed in efficiency units and adjusted for the age of capital and types of labor. Firm-specific time-invariant technical efficiency is obtained using Schmidt and Sickles (1984) approach. The results suggest that the Instrumental Variables method produces more accurate estimates of the unknown firm level technical efficency. Mean efficency scores resulting from the MHT method is of 66.5%.     

Flexibility,labour subcontracting and HRM in the construction industry in Singapore: can the system be refined?

Labour subcontracting is an important labour-use strategy in the construction industry. In their search for labour-market flexibility, employers in the construction industry in Singapore rely extensively on the Kepala (labour subcontracting) system. The Kepala system offers a 'convenient' way of managing operative (skilled, semi-skilled and unskilled) construction workers. Essentially, this paper discusses the merits and demerits of the Kepala system. It is argued that, although employers in the construction industry derive some strategic benefits from the use of labour subcontracting, on the whole, the system has some adverse consequences for workers, companies, the industry and HRM functions. But, in the absence of any better system that the employers can turn to, it is necessary for the Kepala system to be refined. Thus, it is suggested that the Japanese model of labour subcontracting offers lessons, but will require modifications and adaptations before being applied in Singapore.     

A multistage method to measure efficiency and its application to Japanese banking industry

When measuring technical efficiency with existing data envelopment analysis (DEA) techniques, mean efficiency scores generally exhibit volatile patterns over time. This appears to be at odds with the general perception of learning-by-doing management, due to Arrow [The economic implications of learning by doing. Review of Economic Studies 1964; 154–73]. Further, this phenomenon is largely attributable to the fundamental assumption of deterministic data maintained in DEA models, and to the difficulty such models have in incorporating environmental influences. This paper proposes a three-stage method to measure DEA efficiency while controlling for the impacts of both statistical noise and environmental factors. Using panel data on Japanese banking over the period 1997–2001, we demonstrate that the proposed approach greatly mitigates these weaknesses of DEA models. We find a stable upward trend in mean measured efficiency, indicating that, on average, the bankers were learning over the sample period. Therefore, we conclude that this new method is a significant improvement relative to those DEA models currently used by researchers, corporate management, and industrial regulatory bodies to evaluate performance of their respective interests.     

Panel estimators and the identification of firm-specific efficiency levels in parametric,semiparametric and nonparametric settings

The paper analyzes a number of competing approaches to modeling efficiency in panel studies. The specifications considered include the fixed effects stochastic frontier, the random effects stochastic frontier, the Hausman–Taylor random effects stochastic frontier, and the random and fixed effects stochastic frontier with an AR(1) error. I have summarized the foundations and properties of estimators that have appeared elsewhere and have described the model assumptions under which each of the estimators have been developed. I discuss parametric and nonparametric treatments of time varying efficiency including the Battese–Coelli estimator and linear programming approaches to efficiency measurement. Monte Carlo simulation is used to compare the various estimators and to assess their relative performances under a variety of misspecified settings. A brief illustration of the estimators is conducted using U.S. banking data.     

上市公司独立审计制度的博弈分析

注册会计师审计是治理财务舞弊一种不可或缺的外部监控机制,在我国现有注册会计师独立审计聘用制度下是否有效,仍有待检验。本文运用博弈论的方法通过建立模型,揭示了在我国上市公司内部人控制较严重的背景下,由上市公司选择会计师事务所容易导致注册会计师的独立性缺失,难以发挥注册会计师审计应有的作用;如果改由证监会选聘注册会计师,将更有利于注册会计师审计制度职能的实现。     

Long-term analysis of technologically focused smaller manufacturing enterprises

This study examines the operations of technologically focused SMEs over the past 20 years. A panel of SMEs was studied in 1975, 1985, and again in 1995 to determine (1) whether or non-technologically focused SMEs changed over time and (2) if it was possible to identify the differences between those SMEs that perceived themselves to be technologically focused and those that did not. The panel consisted of over 800 SMEs operating in a single Midwestern State business climate. In 1975 the panel generated almost 500 responses to a research instrument that had been designed in a two-stage process. In the first stage, 23 case studies were developed to generate a conceptual and theoretical understanding of SMEs’ operations. The results of the case studies and available theory were used to design a mail questionnaire that was mailed to the original panel. The study suggests that technologically focused SMEs have changed significantly over the 20-year period from 1975 to 1995. Over this period of time, they have responded to the business conditions and competition around them, but have also changed how they view their own internal planning and operation needs.     

Demutualization,outsider ownership,and stock exchange performance: empirical evidence

We employ a balanced panel data set of 28 stock exchanges to disentangle the effects of demutualization and outsider ownership on the operative performance of stock exchanges. For this purpose we calculate in a first step individual efficiency and factor productivity values via Data Envelopment Analysis. In a second step we regress the derived values on variables that—amongst others—represent the different governance regimes of exchanges in order to examine technical efficiency and factor productivity differences between (1) mutuals, (2) demutualized but customer-owned exchanges, and (3) publicly listed and thus at least partly outsider-owned exchanges. We find evidence that demutualized exchanges exhibit higher technical efficiency than mutuals. However, they perform relatively poor as far as productivity growth is concerned. Furthermore, we find no evidence that publicly listed exchanges possess higher efficiency and productivity values than demutualized exchanges with a customer-dominated structure.      

On efficient estimation with panel data: An empirical comparison of instrumental variables estimators

This paper attempts a replication of the Cornwell and Rupert (1988) study—hereafter CR. The CR study investigated the efficiency gains in a returns to schooling example by applying alternative sets of instrumental variables estimators for panel data regressions proposed by Hausman and Taylor (1981), Amemiya and MaCurdy (1986), and Breusch, Mizon, and Schmidt (1989). Corrections on the CR data set lead to changes in the legitimate set of instruments, when the time dummies are excluded from the regression, and to much lower empirical gains in efficiency than those reported in CR. If the time dummies are retained in the wage equation, the experience coefficient is not estimable by the within regression, and the empirical gains in efficiency from using the IV procedures are not limited to the time-invariant education coefficient.