Economies of Scale and Division of Labor in Commercial Banking

Bell, Frederick W.; Murphy, Neil B.

doi:10.2307/1056322

Cited by 38 publications

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“…• Specialised labour [Bell and Murphy (1968);Clark (1988); Muldur (1991)]. A larger bank in terms of size is able to employ more technical and managerial labour, thereby achieving a more efficient organisational form, while favouring expansion into innovative business.…”

Section: Economies Of Scalementioning

confidence: 99%

Analysing the determinants of bank efficiency: the case of Italian banks

2004

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This study investigates the main determinants of Italian banks' cost efficiency over the period 1993-1996, by employing a Fourier-flexible stochastic cost frontier in order to measure X-efficiencies and economies of scale. Quality and riskiness of bank outputs are explicitly accounted for in the cost function and their impact on cost efficiency levels is evaluated. The results show that mean X-inefficiencies range between 13 and 15 per cent of total costs and they tend to decrease over time for all bank sizes. Economies of scale appear present and significant, being especially high for popular and credit co-operative banks. Moreover, the inclusion of risk and output quality variables in the cost function seems to reduce the significance of the scale economy estimates. Following Spong et al. (1995) a profitability test is undertaken that allows for the identification of banks that are both cost and profit efficient. The results suggest that the most efficient and profitable institutions are more able to control all aspects of costs, especially labour costs. Finally, the data are pooled to carry out a logistic regression model in order to examine bank- and market-specific factors that influence Italian banks' inefficiency. Confirming Mester (1993, 1996), inefficiencies appear to be inversely correlated with capital strength and positively related to the level of non-performing loans in the balance sheet. The analysis also shows that there is no clear relationship between asset size and bank efficiency. Finally, it is possible to infer that quoted banks seem to be on average more efficient than their non-quoted counterparts.

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Section: Economies Of Scalementioning

confidence: 99%

Analysing the determinants of bank efficiency: the case of Italian banks

2004

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“…For the selection of variables of model (1), it should be remembered that there are two approaches that define inputs and outputs of banking institutions: the production approach, introduced by Benston (1965) and Bell and Murphy (1968), and the intermediation approach proposed by Sealey and Lindley (1977). Both approaches are widely used in the literature and there is no consensus on the superiority of one over the other (Berger and Humphrey (1997)).…”

Section: Methodsmentioning

confidence: 99%

A Meta-Frontier Function for the Estimation of Islamic and Conventional Banks’ Cost and Revenue Efficiency: The Case of Malaysia from 2006 to 2012

Ghroubi¹,

Abaoub²

2016

IJBM

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We measure cost and revenue efficiency of the Islamic and conventional Malaysian banks by using the stochastic frontier method and the meta-frontier analysis (MFA) over the period [2006][2007][2008][2009][2010][2011][2012]. The use of MFA allows for the correction of the efficiency measurement errors caused by the technological and operational gap. The specific as well as the common frontiers obtained by the stochastic frontier method show the superiority of Islamic banks (IBs) compared to conventional banks (CBs) in terms of cost and revenue efficiency. This can reflect their high managerial capability. Efficiency measurement using MFA partially revealed different results. CBs have higher annual averages of cost efficiency scores than those of IBs over the period 2006-2011. The observed evolutionary trends of these averages contradict those of the capital base. This change in results is explained according to Johnes et al. (2013) by the modus operandi of IBs which seems in average less efficient than that of CBs. As for revenue efficiency, IBs are more efficient than CBs over the entire study period even though the evolution of the technological gap ratio confirms the inefficiency of their modus operandi. These results may be useful to political decision-makers and regulatory authorities.

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“…Por un lado, el enfoque de producción establece que los intermediarios financieros producen depósitos y créditos usando como inputs la mano de obra y el capital. Bajo este enfoque, el output se mide en cantidades, es decir, número de cuentas de créditos y/o depósitos (Benston, 1965;Bell y Murphy, 1968). Por otro lado, el enfoque de intermediación define el output como los distintos tipos de créditos ofrecidos, y los inputs con los que estos se producen son la mano de obra, el capital físico y los recursos financieros o fondos prestables (Benston, Hanweck y Humphrey, 1982).…”

Section: Estimación Del íNdice De Lernerunclassified

Competencia y calidad de cartera en el mercado microfinanciero peruano, 2003-2015

Huaman¹,

Andía²

2016

ECONOMIA

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RESUMENEl objetivo de este estudio es analizar la relación que existe entre la competencia y la calidad de cartera en el sector microfinanciero peruano en el periodo [2003][2004][2005][2006][2007][2008][2009][2010][2011][2012][2013][2014][2015]. Como indicador de competencia se emplea el poder de mercado estimado por el Índice de Lerner y como indicador de calidad de cartera se utiliza la tasa de morosidad. El análisis segmenta el mercado microfinanciero en tres grupos de instituciones microfinancieras (IMF), considerando el volumen promedio de sus colocaciones, de manera que, en el primer grupo se ubican las entidades con un mayor volumen promedio de colocaciones, en el segundo grupo se encuentran las entidades con un volumen medio de colocaciones y finalmente, en el tercer grupo se ubican las entidades con menor volumen promedio de colocaciones. Esta segmentación refleja la heterogeneidad de tamaño que existe entre estas entidades. Los resultados muestran un Índice de Lerner decreciente, para el primer y el tercer grupo, evidenciando una mayor competencia. En el segundo grupo, el comportamiento del Índice de Lerner muestra una tendencia creciente en los últimos meses del periodo estudiado, reflejando una menor competencia. Por otro lado, se evidencia una relación inversa entre el Índice de Lerner y la morosidad en los tres grupos, lo que implica que el aumento de competencia en el mercado microfinanciero ha generado un deterioro en la calidad de cartera crediticia. Este resultado se obtiene controlando el comportamiento de otras variables como son: el ciclo econó-mico, la expansión de los créditos, la eficiencia y la rentabilidad de las instituciones, además del efecto de la crisis financiera internacional del 2008. ABSTRACTThe aim of this study is to analyze the relationship between competition and loan portfolio quality in the Peruvian microfinance sector. To make this analysis the market is segmented into three groups of microfinance microfinance institutions IMFs), considering the average volume of its loans. So that, in the first group (large IMFs) entities of higher average volume of loans are located, in the second group (medium IMFs) entities with an average volume of loans are located and finally, in the third group (small IMFs) are entities with lower average loan volumes. This segmentation reflects the heterogeneity of size for loans between IMFs. The results show the Lerner index decreasing over time, for both the group of large IMFs and the group of small IMFs, showing a decrease of market power and increased competition in these two groups of entities. In the group of medium IMFs behavior Lerner index shows a growing trend in the last months of the period studied thus indicating a greater market power and less competition in this group of microfinance operators. On the other hand, an inverse relationship between the Lerner index over delinquency rate in the three groups of IMFs is found, implying that increased competition in the Peruvian microfinance market has deteriorated the quality of loan ...

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Economies of Scale and Division of Labor in Commercial Banking

Cited by 38 publications

References 0 publications

Analysing the determinants of bank efficiency: the case of Italian banks

Analysing the determinants of bank efficiency: the case of Italian banks

A Meta-Frontier Function for the Estimation of Islamic and Conventional Banks’ Cost and Revenue Efficiency: The Case of Malaysia from 2006 to 2012

Competencia y calidad de cartera en el mercado microfinanciero peruano, 2003-2015

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