Financial costs,operating costs,and specialization of Spanish banking firms as distribution dynamics

There exists a remarkable concern among financial analysts and policy makers about the high level of cost dispersion in banking. A model of distribution dynamics is applied to the Spanish banking companies in order to analyse whether such a dispersion is so high and if some factors like, for instance, specialization factors might somewhat influence the dynamics of both financial and operating expenses. Results show that there does not appear to exist a decrease in the level of cost dispersion, although firms' relative positions are changing. Yet, when controlling for the varying output mixes, firms produce results which differ much, as dispersion - assessed by means of density functions estimated nonparametrically - decreases substantially, suggesting concurrence is higher among firms with similar output mixes.     

Looking for sustainable development: Socially responsible mutual funds and the low-carbon economy

Sustainable investment responds to demands for carbon and climate-neutral societies. To address the urgency around climate change and provide investors with more qualified information, Morningstar has developed the Low Carbon Designation (LCD) to indicate that the companies held in a portfolio are in general alignment with the transition to a low-carbon economy. The designation is given to portfolios that have low carbon risk and fossil fuel exposure scores. The present study builds on the LCD by examining the relationship between these scores and financial performance. With this aim, we analyze 3920 socially responsible mutual funds from across the world. Results show differences in financial performance according to scores and investment areas. We find evidence that funds considered to have higher levels of sustainability achieved better performance than funds with higher exposure to companies involved in carbon and fossil fuel industries. We provide insights on the informativeness of these new scores with a focus on climate change and their relevance in helping investors to identify climate-aware funds. This study highlights the importance of introducing strategies to develop green finance; the analysis confirms that sustainability improves performance. Finally, the LCD indicator is shown to be relevant for making fairer comparisons among socially responsible funds and, ultimately, for developing low-carbon economies.     

On the determinants of local government performance: A two-stage nonparametric approach

This article analyzes the efficiency of local governments in the Comunitat Valenciana (Spain) and their main explanatory variables. The analysis is performed in two stages. Firstly, efficiency is measured via (nonparametric) activity analysis techniques. Specifically, we consider both Data Envelopment Analysis (DEA) and Free Disposable Hull (FDH) techniques. The second stage identifies some critical determinants of efficiency, focusing on both political and fiscal policy variables. In contrast to previous two-stage research studies, our approach performs the latter attempt via nonparametric smoothing techniques, rather than econometric methods such as OLS or Tobit related techniques. Results show that efficiency scores, especially under the nonconvexity assumption (FDH), are higher for large municipalities. Thus, there is empirical evidence to suggest that resources may be better allocated by large municipalities. However, the inefficiency found is not entirely attributable to poor management, as second-stage analysis reveals both fiscal and political variables to be explicably related to municipality performance. Moreover, the explanatory variables’ impact on efficiency is robust to the chosen technique—either convex DEA or nonconvex FDH.     

The effects of geographic expansion on the productivity of Spanish savings banks

This article analyzes the effects of geographic expansion on the productivity of Spanish savings banks. The study uses data from 1992 to 2004, the period when most savings banks expanded geographically. We consider an alternative approach to most multi-stage studies, which uses nonparametric methods both to measure productivity growth and to analyze its relationship with branch office expansion. Specifically, we use nonparametric regression techniques and their natural complement, conditional density estimation. Results indicate that savings banks that expand geographically outside their natural markets achieve greater productivity gains. However, there are some firms for which this result is more moderate. In contrast, lower increases in productivity are found in savings banks that expand on a nationwide basis, or that confine their territorial expansions to their traditional markets.     

Output complexity, environmental conditions, and the efficiency of municipalities

Over the last few years, many studies have analyzed the efficiency of local governments in different countries. An accurate definition of their output bundles—i.e., the services and facilities they provide to their constituencies—is essential to this research. However, several difficulties emerge in this task. First, since in most cases the law only establishes the minimum amount of services and facilities to provide, it may well be the case that some municipalities go beyond the legal minimum and, consequently, might have an uncertain effect on efficiency when compared to other municipalities which stick to the legal minimum. Second, municipalities face very different environmental conditions, which raises some doubts about the plausibility of an unconditional analysis. This study tackles these problems by proposing an analysis in which the efficiency of municipalities is evaluated after splitting them into clusters according to various criteria (output mix, environmental conditions, level of powers). We perform our estimations using order-m frontiers, given their robustness to outliers and immunity to the curse of dimensionality. We provide an application to Spanish municipalities, and results show that both output mix and, more especially, environmental conditions, should be controlled for, since efficiency differences between municipalities in different groups are notable.     

Profit efficiency and earnings quality: Evidence from the Spanish banking industry

Journal of Productivity Analysis - The analysis of efficiency and productivity in banking has received a great deal of attention for almost three decades now. However, most of the existing...     

Cost Efficiency and Product Mix Clusters across the Spanish Banking Industry

The competitive conditions under which Spanish bankingfirms operate have become much tighter. In these circumstances,inefficiencies should disappear, and if this does not occur,appropriate explanations should be explored. This paper doesexactly that, by estimating cost efficiency scores and assessingwhether they are biased by productive specialization. Thesequestions are not new, unlike the technique employed, whichenables us to evaluate firms' efficiencies by comparing them onlywith those focusing on similar specializations, without the needto specify separate frontiers for different output mixes. Resultsshow that firms' efficiency scores might be downward or upwardbiased when compared with all other firms in the industry, insteadof only with those focusing on similar activities.     

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.     

An international comparison of educational systems: a temporal analysis in presence of bad outputs

This study uses the global non-radial Malmquist index to measure performance change in the educational systems of 29 countries/economies participating in PISA 2003 and 2012 for students at age 15 in the disciplines of mathematics and reading. This methodology is particularly appropriate both for its desirable properties as well as its suitability for the educational context. Results indicate a positive evolution in educational systems’ performance during this period. This improvement is mainly due a positive efficiency change, which offsets the negative technological change observed. Nevertheless, a deeper scrutiny at the country level shows that results varied remarkably among them.     

The dynamics of international trade integration: 1967–2004

This article explores how trade integration has advanced over the last four decades and what the foreseeable future holds, among other related questions. To this end, we consider certain methods which have scarcely been used in the literature on trade integration. First, we measure trade integration through a set of indicators which control not only for how open economies are, but also for their degrees of connectedness in the World Trade Web. Second, we assess how these indicators have evolved over time, what the likely steady state distribution might be, and whether results could differ depending on a variety of weighting schemes (GDP, population). The results show that, under current trends, future world trade will be much more trade-integrated, especially for the most heavily populated countries. However, there is still a long way to go before reaching the hypothetical scenario of geographically neutral trade.