Operational efficiency in banking: An international comparison |
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| Institution: | 1. Baruch College, City University of New York, 17 Lexington Ave., New York, NY 10010, USA;2. Hofstra University, Hempstead Turnpike, Hempstead, NY 11550, USA;1. School of Management, Beijing Normal University Zhuhai, No. 18, Jinfeng Road, Tangjiawan, Zhuhai City 519087, Guangdong Province, China;2. Department of Money and Banking, National Chengchi University, No. 64, Sec.2, ZhiNan Rd., Wenshan District, Taipei City 11605, Taiwan;1. Economics Department, Lancaster University Management School, LA1 4YX, United Kingdom;2. Isenberg School of Management, University of Massachusetts-Amherst, 90 Campus Center Way, 209A Flint Lab, Amherst, MA 01003, United States;3. The University of Kent, Kent Business School, Canterbury, Kent, United Kingdom;1. Department of Money and Banking, National Chengchi University, Taiwan, R.O.C.;2. Taiwan Academy of Banking and Finance, Taiwan, R.O.C.;1. School of Economics, Capital University of Economics and Business, China;2. School of International Economics, University of International Business and Economics, China;3. China institute for WTO Studies, University of international Business and Economics;1. Centre for Business in Society (CBiS), Faculty of Business and Law, Coventry University, Gosford Street, Coventry CV1 5DL, UK;2. School of Economics, Finance and Accounting, Faculty of Business and Law, Coventry University, Priory Street, Coventry CV1 5FB, UK |
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| Abstract: | In this paper, we estimate a global cost function for international banks to test for both input and output inefficiencies. Our results for 1988–1992 suggest that for banks in 15 countries, the prevalence of input X-inefficiencies far outweighs that of output inefficiencies (as measured by economies of scale and scope). Moreover, our results suggests that the distribution-free model overestimates the magnitude of X-inefficiencies relative to the stochastic cost frontier approach.Large banks in separated banking countries (that prohibit the functional integration of commercial and investment banking) had the largest measure of input inefficiency amounting to 27.5 percent of total costs as well as significant levels of diseconomies of scale. All other banks have X-inefficiency levels ranging in the area of fifteen percent of total costs with slight economies of scale for small banks. |
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