Bank efficiency: The role of bank strategy and local market conditions

Bos, Jaap; Kool, Clemens

doi:10.1016/j.jbankfin.2005.07.008

Cited by 144 publications

(96 citation statements)

References 35 publications

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“…On the other hand, in order to be able to serve customers efficiently the co-operative banks should also be able to show a healthy profit. For this reason, we follow Bos and Kool (2006) who, when studying Dutch co-operative banks, investigate both profit and cost efficiency.…”

Section: The Estimation Equation For Our Fixed Effects Specification Ismentioning

confidence: 99%

“…If training is likely to affect wages, using bank-level data on wages would mean that this impact would be controlled for and the impact of training on costs would be underestimated. In the spirit of Bos and Kool (2006) and Koetter (2006), we construct these prices from regional clusters of banks from the 20 regions of Finland and calculate for each bank the average price faced by other banks in the region, excluding the observation itself from the calculation.…”

Section: The Estimation Equation For Our Fixed Effects Specification Ismentioning

confidence: 99%

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The effects of general and firm-specific training on wages and performance: evidence from banking

Jones

Kalmi

Kauhanen

2011

Oxford Economic Papers

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By using new panel data for Finnish banks we study the impact of training on wages and performance. To the best of our knowledge, ours is the first paper to compare explicitly the effects of general and firm-specific workplace training on outcomes for both employees and firms. Unlike much existing literature, we find stronger evidence that training improves worker outcomes rather than organizational performance. Depending upon specification, the estimated wage elasticity with respect to training is in the range of 3-7%, whereas the performance effects vary widely depending on the measures of training intensity. The other key finding is that general training is associated with higher wage and performance effects than is firm-specific training. 2 I IntroductionTwo important issues are raised in most economic studies of training. First, does training increase efficiency and by how much? Second, who reaps the gains from training? In addressing these issues, the standard (Beckerian) theory concludes that in competitive markets, employers will not pay for general training. By definition, general training increases employee productivity by the same amount in the current workplace and elsewhere. If employees participate in general training, their employers have to bid up employees' wages reflecting the productivity increases due to training. If they fail to do so, other potential employers can "poach" these workers and free-ride in training expenses. Hence, according to this theory, in competitive labour markets, employers would finance training only if there are some specific elements in it. By contrast, the early empirical evidence on training revealed that employer-provided training is mostly general in nature and that, nevertheless, employers paid the costs of training (e.g. Lynch 1992; Spletzer, 1998, 1999;Barron et al. 1999).To explain this inconsistency between theory and empirics, many subsequent theorists point to imperfections in labour markets. It is argued (e.g. Acemoglu and Pischke, 1999;Manning, 2003) that search frictions, certain labour market institutions (e.g. unions, minimum wages), imperfect competition in small labour markets (Stevens 1994), or asymmetric information in training among current and potential employers may lead to situations where employees capture only a fraction of the productivity gains.These models also imply that wages do not equal marginal revenue product, and this has motivated recent literature that studies the impact of training on productivity and wages 1 .Consistent with theory grounded in imperfect labour markets, more recent empirical 1 For theoretical literature see e.g. Acemoglu and Pischke (1999) and Booth and Zoega (2004). 3 evidence on the impact of training on wages and productivity finds that there is a wedge between wages and productivity effects and that employees and employers seem to share the benefits from training. This applies both to industry levels studies (Conti 2005;Dearden et al. 2006) and firm level studies (e.g. Ballot et al. 2006). However, w...

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Section: The Estimation Equation For Our Fixed Effects Specification Ismentioning

confidence: 99%

Section: The Estimation Equation For Our Fixed Effects Specification Ismentioning

confidence: 99%

The effects of general and firm-specific training on wages and performance: evidence from banking

Jones

Kalmi

Kauhanen

2011

Oxford Economic Papers

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“…Fries and Taci (2005) found similar results for banks with majority of foreign ownership in emerging economies. Regarding size, previous studies have found that large institutions tend to exhibit greater efficiency associated to higher scale economies (Bos and Kool, 2006;Glass and McKillop, 2006;Wheelock and Wilson, 2012;Hughes and Mester, 2013). In previous applications to Colombian banks, both foreign and large banks have also been found to be more cost efficient than local and small banks (Moreno and Estrada, 2013;Galán et al, 2014c;Sarmiento et al, 2013).…”

Section: Resultsmentioning

confidence: 96%

“…Foreign banks may deal better with risk exposure given cheaper access to funding sources or more diversification (see Chen and Liao, 2011). Similar effects could be faced by large institutions or those operating in different markets, mainly associated to scale economies (Bos and Kool, 2006;Wheelock and Wilson, 2012). Moreover, recent studies show that large banks face lower cost on both deposits and interbank funds mainly because their creditors infer that those banks are too-important-to-fail and will be saved by the government in case of failure to avoid contagion into the financial system (Bertay et al, 2013;Santos, 2014;IMF, 2014).…”

Section: Introductionmentioning

confidence: 99%

Heterogeneous Effects of Risk-Taking on Bank Efficiency: A Stochastic Frontier Model with Random Coefficients

Sarmiento

Galán

2014

SSRN Journal

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We estimate a stochastic frontier model with random inefficiency parameters, which allows us not only to identify the role of bank risk-taking on driving cost and profit inefficiency, but also to recognize heterogeneous effects of risk exposure on banks with different characteristics. We account for an integral group of risk exposure covariates including credit, liquidity, capital and market risk, as well as bank-specific characteristics of size and affiliation. The model is estimated for the Colombian banking sector during the period 2002-2012. Results suggest that risk-taking drives inefficiency and its omission leads to over (under) estimate cost (profit) efficiency. Risk-taking is also found to have different effects on efficiency of banks with different size and affiliation, and those involved in mergers and acquisitions. In particular, greater exposures to credit and market risk are found to be key profit efficiency drivers. Likewise, lower liquidity risk and capital risk lead to higher efficiency in both costs and profits. Large, foreign and merged banks benefit more when assuming credit risk, while small, domestic and non-merged banks institutions take advantage of assuming higher market risk.

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“…Since the pioneering contributions by Banker and Morey (1986a,b), many studies have analyzed the issue. Most of the ensuing literature has been of an applied nature (see, for instance Bos and Kool, 2006), although several theoretical refinements to the initial methodologies have also been proposed (see, for instance Ruggiero, 2004). This body of literature postulates that environmental conditions may have a strong impact on DMUs' performance.…”

Section: Introductionmentioning

confidence: 99%

Output complexity, environmental conditions, and the efficiency of municipalities

2012

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Over the last few years, many studies have analyzed the productive 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 be labeled as inefficient 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 a metafrontier analysis in which the efficiency of municipalities is evaluated after splitting them into clusters according to various criteria (output mix, environmental conditions, size). 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. Keywords: efficiency, environmental conditions, local government, metafrontier, order-m JEL Classification: D24, D60, H71, H72 ResumenDurante los últimos años muchos trabajos han venido analizando la eficiencia productiva de las corporaciones locales de una gran variedad de países. Para este tipo de estudios resulta crucial una definición precisa de los servicios e infraestructuras que los municipios proporcionan a sus ciudadanos. Sin embargo, esta tarea presenta varias dificultades. En primer lugar, dado que en muchas circunstancias la ley únicamente establece los servicios mínimos que debe proporcionar un municipio, puede darse el caso de que algunos municipios vayan más allá de este mínimo legal y, consecuentemente, sean clasificados como ineficientes al compararlos con otros municipios que se ciñen al mínimo. En segundo lugar, las corporaciones locales operan en condiciones ambientales muy dispares, lo cual genera dudas acerca de la factibilidad de un análisis incondicional. Este trabajo aborda estas cuestiones proponiendo un análisis metafrontera en el que la eficiencia de las corporaciones locales se evalúa tras clasificarlas en distintos grupos de acuerdo con criterios múltiples (output mix, condiciones ambientales, tamaño). Las estimaciones son llevadas a cabo utilizando fronteras orden-m, debido a la robustez que presentan frente a observaciones atípicas y la inmunidad a la "maldición de la dimensionalidad" (curse of dimensionality). Llevamos a cabo una aplicación a los municipios españoles, y los resultados indican que tanto el output mix como, sobre todo, las condiciones ambientales, deberían ser tenidas en cuenta al eva...

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Bank efficiency: The role of bank strategy and local market conditions

Cited by 144 publications

References 35 publications

The effects of general and firm-specific training on wages and performance: evidence from banking

The effects of general and firm-specific training on wages and performance: evidence from banking

Heterogeneous Effects of Risk-Taking on Bank Efficiency: A Stochastic Frontier Model with Random Coefficients

Output complexity, environmental conditions, and the efficiency of municipalities

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