Profit and cost efficiency in the Italian banking industry (2006-2011)

Aiello, Francesco; Bonanno, Graziella

doi:10.17811/ebl.2.4.2013.190-205

Cited by 24 publications

(35 citation statements)

References 21 publications

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“…The efficiency levels are higher in small Banks than in major ones, but minor, medium, and large Banks achieve cost efficiency levels higher than the small ones. 3 These results are quite interesting and sometimes surprising such as the one that smaller banks are more efficient than bigger banks (Aiello & Bonanno, 2013;Bonanno, 2014), but for our aim the most Source: Own elaboration on ABI data. Significance levels: ***= 0.001; **= 0.01; *= 0.05. sigma 2 = σ 2 u + σ 2 v ; this is composed of the error variance, given by the sum of the variances of the two components.…”

Section: First Stage: Results From Sfamentioning

confidence: 90%

“…These results are quite interesting and sometimes surprising such as the one that smaller banks are more efficient than bigger banks (Aiello & Bonanno, ; Bonanno, ), but for our aim the most important issue is the following one. We obtain that the erratic component u it , the share of the composite error that measures inefficiency, has been “cleaned up” from some sources of inefficiency (bad loans, solvency, etc.…”

Section: Main Findingsmentioning

confidence: 99%

“…Several studies employing efficiency methodology (DEA or SFA) focused on the banking sector (Avkiran, 2011;Battese et al, 2000;Casu et al, 2004;Deville, 2009;Deville et al, 2014;Halkos & Salamouris, 2004;Kao & Liu, 2014;Matthews, 2013;Seiford & Zhu, 1999;Wang et al, 2014;Yalama & Coskun, 2007), also in Italy (Aiello & Bonanno, 2013, 2016a, 2016bBonanno, 2014). Nevertheless, to date, no study uses a two-stage SFA-DEA approach to measure MA in banking sector.…”

Section: Literature Reviewmentioning

confidence: 99%

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Measuring Managerial Ability Using a Two‐stage SFA‐DEA Approach

Veltri

D’Orio

Bonanno

2016

Knowl Process Manag

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The article focuses on the measurement of a relevant component of the human capital, the managerial ability (MA). Quantifying MA is central to management literature. Prior research indicates that manager specific features (ability, talent, reputation, or style) affect economic outcomes but, in management literature, most of the measures used in archival research also reflect significant aspects of the firm that are outside of management's control. The article aims to find a measure, better than existing ones, which allows distinguishing the effect of the manager from the effect of the firm in creating firm value. The article uses the “two‐stage SFA‐DEA” approach, in which both Stochastic Frontier Approach (SFA) and Data Envelopment Analysis (DEA) are used to estimate the efficiency scores firms adopt to derive a measure of MA. The idea is to obtain a measure of MA as a residue of the inefficiency equation of SFA and to use it as a new input to insert in the “second/third” DEA stage. Italian banks have been chosen as the sample to investigate and implement the model. The differences in results with or without this new MA measure provide evidence of the existence of this contribution. The originality of the article consists in the proposition of a new model to measure MA, which outperforms the alternative measures, simple to use as it is based on easily obtainable financial data and available for a broad cross section of firms, so opening the door to a wide array of studies previously difficult to conduct. Copyright © 2016 John Wiley & Sons, Ltd.

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Section: First Stage: Results From Sfamentioning

confidence: 90%

Section: Main Findingsmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Measuring Managerial Ability Using a Two‐stage SFA‐DEA Approach

Veltri

D’Orio

Bonanno

2016

Knowl Process Manag

Self Cite

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“…The analysis will be informed by the theory of efficiency using the Stochastic Frontier profit framework (SFPF). The stochastic frontier analysis (SFA) is a stochastic method because it allows individuals to be distant from the frontier and for randomness (Aigner et al 1977;Meeusen and van de Broek 1997;Aiello and Bonanno 2013;Djomo 2019). It differs from the Data Envelopment Analysis (DEA), which supposes that distance from the frontier is entirely due to inefficiency.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Perceived effects of climate change on profit efficiency among small scale chili pepper marketers in Benue State, Nigeria

et al. 2020

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In the determination of the level of efficiency of an enterprise, the role of climate change cannot be overemphasized. However, some scholars are of the view that climate change might not really affect the level of efficiency of an enterprise due to its indirect effect on the performance of an enterprise. Understanding the perception of marketers of agricultural produce about climate change in agribusiness is paramount to sustain small scale enterprises. This study sought to analyze the perceived effects of climate change on profit efficiency among small scale chili pepper marketers in Benue State, Nigeria. Data were collected with the use of structured questionnaire and analyzed using stochastic frontier production function. A combination of purposive and random sampling techniques was used to select 349 producers and marketers, 152 processors, 143 processed retailers and 145 non-processed retailers giving a total of 789 small scale chili pepper marketers from three (3) agricultural zones that make up Benue State, Nigeria. The result showed that on the average, small scale chili pepper marketers are relatively profit efficient. The results also showed that in the marketing chain, small scale processed retailers had the highest mean profit efficiency (0.86). It was therefore recommended that switching business to adapt to crop varieties (cereal crops) that are more resilient to climate change could be an opportunity to small scale chili pepper marketers struggling with chili pepper to leapfrog previous performance and become more productive. Further, the training on preservation of perishable crop should be given to chili pepper producers and marketers and non-processed retailers given that excessive rainfall decreases their profit efficiency.

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“…This finding aligns with (Ab-Rahim et. el., 2012) but contradicts Aiello & Bonanno (2013). Although the proxy for credit risk is not relevant to cost efficiency, it will be prudent for banks to pay attention to it to avoid plausible negative impact on cost efficiency (Xiang, Shamsuddin, & Worthington, 2015).…”

Section: Determinants Of Cost Efficiencymentioning

confidence: 99%

Cost Efficiency Determinants: Evidence from the Canadian Banking Industry

Oredegbe¹

2019

IJBM

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This study examines the cost efficiency of the banking industry in Canada. Utilizing 12 years of data (i.e., 2006 to 2017), and a two-stage data envelopment analysis (DEA), it provides insight on the determinants of the industry’s cost efficiency. It finds that the industry is cost inefficient, and that it could reduce costs by 11.52 percent. The cost inefficiency is due to technical and allocative inefficiencies, with technical inefficiency playing a dominant role. The technical efficiency decomposition shows that pure technical efficiency improved, but the scale efficiency deteriorated. The analysis of the determinants of cost efficiency reveals that deposit conversion into loans, high capitalization, and managerial tolerance for increase in administrative expense drive cost efficiency. On the other hand, market power and diversification diminish cost efficiency. In addition, the impact of profitability and credit risk are inconsequential to cost efficiency. This study contributes to literature by providing insights unique to Canada. Managers in the industry, policy makers, and regulators can point to these findings as empirical evidence supporting measures aimed at increasing the industry’s competitiveness and resilience.

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Profit and cost efficiency in the Italian banking industry (2006-2011)

Cited by 24 publications

References 21 publications

Measuring Managerial Ability Using a Two‐stage SFA‐DEA Approach

Measuring Managerial Ability Using a Two‐stage SFA‐DEA Approach

Perceived effects of climate change on profit efficiency among small scale chili pepper marketers in Benue State, Nigeria

Cost Efficiency Determinants: Evidence from the Canadian Banking Industry

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