A review of bank efficiency and productivity

Bhatia, Vaneet; Basu, Sankarshan; Mitra, Subrata Kumar; Dash, Pradyumna

doi:10.1007/s12597-018-0332-2

Cited by 50 publications

(47 citation statements)

References 156 publications

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“…On the other hand, the data envelopment analysis method has been widely used in the performance assessment of various subjects [109,110]. It has been mainly used in assessing the functionalities of educational units, like schools and universities, healthcare units, like clinics and hospitals, financial units, like banks, and so forth.…”

Section: Literature Reviewmentioning

confidence: 99%

An integrated Multi-Criteria Decision Making Model for Sustainability Performance Assessment for Insurance Companies

et al. 2020

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To stay competitive in a business environment, continuous performance evaluation based on the triple bottom line standard of sustainability is necessary. There is a gap in addressing the computational expense caused by increased decision units due to increasing the performance evaluation indices to more accuracy in the evaluation. We successfully addressed these two gaps through (1) using principal component analysis (PCA) to cut the number of evaluation indices, and (2) since PCA itself has the problem of merely using the data distribution without considering the domain-related knowledge, we utilized Analytic Hierarchy Process (AHP) to rank the indices through the expert’s domain-related knowledge. We propose an integrated approach for sustainability performance assessment in qualitative and quantitative perspectives. Fourteen insurance companies were evaluated using eight economic, three environmental, and four social indices. The indices were ranked by expert judgment though an analytical hierarchy process as subjective weighting, and then principal component analysis as objective weighting was used to reduce the number of indices. The obtained principal components were then used as variables in the data envelopment analysis model. So, subjective and objective evaluations were integrated. Finally, for validating the results, Spearman and Kendall’s Tau correlation tests were used. The results show that Dana, Razi, and Dey had the best sustainability performance.

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Section: Literature Reviewmentioning

confidence: 99%

An integrated Multi-Criteria Decision Making Model for Sustainability Performance Assessment for Insurance Companies

et al. 2020

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“…It is crucial to improve bank performance by identifying reasons for inefficient resource allocation and encouraging the best practices. Bank performance is usually evaluated through frontier efficiency analysis, which benchmarks the efficiency of banks with the best performing ones in the sector and then results can be employed for further analysis and best practices sharing (Bhatia, Basu, Mitra, & Dash, 2018). Frontier efficiency, which overcomes the shortcoming of the ratio and regression analysis through benchmarking techniques comparing the performance with the peers on scale, revenue, cost, profit and technology utilization (Banker, Cummins, & Klumpes, 2010).…”

Section: Bank Competition and Efficiencymentioning

confidence: 99%

“…Non-parametric approaches typically include Data Envelopment Analysis (DEA) and Free Disposal Hull (FDH) analysis. Parametric techniques normally include Stochastic Frontier Approach (SFA) and DFA (Bhatia et al, 2018).…”

Section: Bank Competition and Efficiencymentioning

confidence: 99%

Bank Competition, Efficiency, and Stability in Macau

Xia

Lei²,

Liang³

2019

AFR

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Macau has the uppermost population density and the fourth-highest GDP per capita in the world. Macau’s banking system is regarded as one of the most important indicators of Macau’s macroeconomic growth and stability during its transformation into a wealthy and modern metropolis. In this study, we use a sample of 26 banks to explore the relationship of bank competition, efficiency and stability in Macau from its return to China in 1999 to 2016. Our results demonstrate that bank competition does cause efficiency in Macau throughout the study period. We also find indications of a positive but not significant connection between bank market power and bank fragility including income volatility and insolvency risk. Moreover, this study finds no evidence that the size of operations proxied by total bank loans and total assets would impact bank efficiency, indicating that economies of scale or bank market share don’t necessarily bring about efficiency in Macau. Our evidence contributes to the literature by being the first to thoroughly examine the relation of bank competition, efficiency and stability in Macau. The findings provide meaningful implications to the practitioners and policymakers to make sound decisions accordingly, especially to closely monitor and maintain a proper level of competition in Macau’s banking sector.

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“…Hence, the policy makers have incentives to investigate the efficiency of the banking industry. Banks also have their own motivations to ensure efficiency because they are predominantly funded by deposits, and the collection of which is largely contingent on the proper use of such resources (Bhatia et al, 2018).…”

Section: Related Literaturementioning

confidence: 99%

Are Islamic Banks Less Efficient than other Banks? Evidence from Bangladesh

Haque

Sohel²

2019

Asian Economic and Financial Review

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Considering the recent shrinkage in Islamic banks' profitability in Bangladesh, this study investigated whether these banks are less efficient than the conventional and mixed banks. Using 250 firm-year observations from 38 private commercial banks for the years from 2011 to 2017 and estimating operational efficiency through the Data Envelopment and Stochastic Frontier Analyses, we found robust evidence that Islamic banks are less efficient than the conventional and mixed banks. In additional analysis, it was found that the lower efficiency of Islamic banks was driven by their noninvestment income. A significant negative shift in Islamic banks' efficiency was evident in the most recent years compared to the earliest periods in our sample window. These findings helped us explain why the relative profitability of Islamic banks has declined recently. We suggest that Islamic banks' management pay more attention to their portfolio of non-investment products and services in order to remain competitive in the fast-growing banking landscape in Bangladesh. Contribution/ Originality: This study contributes to the existing literature on estimating banks' efficiency through the techniques of frontier analysis. While revenue is one of the primary sources of cash inflows, research examining banks' efficiency in generating revenues by utilizing their resources is scarce. We filled this gap in the literature.

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A review of bank efficiency and productivity

Cited by 50 publications

References 156 publications

An integrated Multi-Criteria Decision Making Model for Sustainability Performance Assessment for Insurance Companies

An integrated Multi-Criteria Decision Making Model for Sustainability Performance Assessment for Insurance Companies

Bank Competition, Efficiency, and Stability in Macau

Are Islamic Banks Less Efficient than other Banks? Evidence from Bangladesh

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