Intra- and inter-country bank branch assessment using DEA |
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Authors: | Denise McEachern Joseph C Paradi |
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Institution: | (1) CIBC Process Engineering, 25 King Street West, Commerce Court North, 22nd Floor, Toronto, ON, Canada, M5L 1A2;(2) Centre for Management of Technology and Entrepreneurship, University of Toronto, 200 College Street, Toronto, ON, Canada, M5S 3E5 |
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Abstract: | Increasingly globalized financial markets with considerable activity in the multinational sector have created the need to
understand inter-country bank branch performance. This topic is relatively unstudied, primarily due to the immense difficulty
encountered in gathering reliable data. Fortunately, we have been able to obtain data on a group of banks operating in one
geographical market area, but in different countries. In this paper we critically assess bank branch profitability and productivity
in seven national branch networks owned and operated by a multi-national financial services corporation. The corporate head
office (owner) imposes its management philosophy equally on all of its subsidiaries, thus removing executive managerial and
corporate disparity. Results suggest that countries in which branch performance is quite consistent amongst domestic branches
are less productive and less profitable when compared to other countries that have more disparity in their efficiency scores.
In addition, we discovered that, surprisingly, branches do not have to be productive in order to be profitable and this led
us to somewhat of a major breakthrough in inter-country branch analysis. Significant managerial advice may be derived from
these results vis-à-vis trans-national benchmarking and opportunity for performance improvements both at the branch level
and nationally as well.
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Keywords: | DEA Profitability Bank branch efficiency Inter-country benchmarking Productivity and profitability |
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