Technical, Scale, and Allocative Efficiencies in U.S. Banking: An Empirical Investigation

Aly, Hassan Y.; Grabowski, Richard; Pasurka, Carl A.; Rangan, Nanda

doi:10.2307/2109710

Cited by 394 publications

(209 citation statements)

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“…Within this methodological framework, the overall technical efficiency is decomposed into pure technical and scale efficiencies, a method initially suggested by Farrell (1957) and later extended by Banker, Charnes, and Cooper (1984), and Färe, Grosskopf, and Lovell (1985). Empirical applications of the decomposition of overall technical efficiency to banking include but are not limited to those by Rangan et al (1988), Aly et al (1990), and Drake and Hall (2003).…”

Section: Methodology Nonparametric Methodsmentioning

confidence: 99%

Technical and Scale Efficiencies for Chinese Rural Credit Cooperatives: A Bootstrapping Approach in Data Envelopment Analysis

Dong

Featherstone

2006

Journal of Chinese Economic and Business Studies

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Chinese rural credit cooperatives (RCCs) are a major supplier of credit to the rural sector in the country. However, Chinese RCCs are currently encountering operating problems, and an experimental reform is being carried out to restructure and reform the RCCs. In order to have some idea about the efficacy of reform, it is important to have an understanding of the institutional economics underlying the delivery of rural credit in China. This paper evaluates pure technical efficiency, overall technical efficiency, and scale efficiencies for RCCs in China using nonparametric techniques. The use of a bootstrap algorithm is proposed to perform inference for efficiency measures. Disciplines Agricultural and Resource Economics | Agricultural Economics | Public Economics AbstractChinese rural credit cooperatives (RCCs) are a major supplier of credit to the rural sector in the country. However, Chinese RCCs are currently encountering operating problems, and an experimental reform is being carried out to restructure and reform the RCCs. In order to have some idea about the efficacy of reform, it is important to have an understanding of the institutional economics underlying the delivery of rural credit inChina. This paper evaluates pure technical efficiency, overall technical efficiency, and scale efficiencies for RCCs in China using nonparametric techniques. The use of a bootstrap algorithm is proposed to perform inference for efficiency measures.

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Section: Methodology Nonparametric Methodsmentioning

confidence: 99%

Technical and Scale Efficiencies for Chinese Rural Credit Cooperatives: A Bootstrapping Approach in Data Envelopment Analysis

Dong

Featherstone

2006

Journal of Chinese Economic and Business Studies

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“…Other relevant studies on output allocative and technical efficiency are Aly et al (1990) and English et al (1993).…”

Section: X-efficienciesmentioning

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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“…2 for a flow chart of a typical two-stage analysis (e.g., Rangan et al 1988;Elyasiani and Mehdian 1990;Aly et al 1990;Favero and Papi 1995;Miller and Noulas 1996;Bhattacharyya et al 1997;Chen 1998;Chu and Lim 1998;Barr et al 1994;Barr and Siems 1997;Pasiouras 2008;Wanke and Barros 2014;Kwon and Lee 2015;Du et al 2018). Note however that the efficiency scores obtained with a two-stage analysis would still be environmentally-biased, because the inputs and outputs used in the first stage are not adjusted for environment.…”

Section: Landscape Of Research On Efficiency Assessment In Bankingmentioning

confidence: 99%

“…With respect to the type of assessment perspective, which drives the choices of inputs and outputs, we classify the literature into six categories; namely, the intermediation approach or perspective (e.g., Rangan et al 1988;Ferrier and Lovell 1990;Charnes et al 1990;Mehdian 1990, 1992;Aly et al 1990;Yue 1992;Grabowski et al 1993;Fukuyama 1993;Zaim 1995;Favero and Papi 1995;Miller and Noulas 1996;Taylor et al 1997;Chen 1998;Drake et al 2006;Liu 2018), the asset approach (e.g., Favero and Papi 1995), the production approach (e.g., Drake et al 2006;Liu and Tone 2008), the value added approach (e.g., Bhattacharyya et al 1997;Pastor et al 1997;Chu and Lim 1998;Pastor 2002;Das and Ghosh 2006), the profit-oriented approach (e.g., Berger and Mester 2003;Drake et al 2006;Liu and Tone 2008), and the user cost approach (e.g., Hancock 1985a, b;Fixler and Zieschang 1992).…”

Section: Landscape Of Research On Efficiency Assessment In Bankingmentioning

confidence: 99%

“…The first category consists of single country focused studies and covers US Banks (Rangan et al 1988;Ferrier and Lovell 1990;Mehdian 1990, 1992;Aly et al 1990;Yue 1992;Miller and Noulas 1996;Kwon and Lee 2015), UK Banks (Drake 2001;Webb 2003;Webb et al 2010;Tanna et al 2011), Italian Banks (Favero and Papi 1995), Turkish Banks (Zaim 1995;Kutlar et al 2017), Japanese Banks (Fukuyama 1993;Liu and Tone 2008), Taiwanese Banks (Chen 1998;Liu 2018), Hong Kong Banks (Drake et al 2006), Singaporean Banks (Chu and Lim 1998), Indian Banks (Bhattacharyya et al 1997), Mozambique Banks (Wanke et al 2016), and Korean Banks (Lee et al 2017). The second category consists of multi-country focused studies and covers banks in several countries such as US, Australian, New Zealand, Austrian, Spanish, German, UK, Italian, Belgian, French, Danish, Luxembourg, Dutch, and Portuguese Banks (e.g., Pastor et al 1997;Pastor 2002;Lozano-Vivas et al 2002;Casu and Molyneux 2003;Pasiouras 2008;Avkiran 2009).…”

Section: Landscape Of Research On Efficiency Assessment In Bankingmentioning

confidence: 99%

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Assessing efficiency profiles of UK commercial banks: a DEA analysis with regression-based feedback

Ouenniche

Carrales

2018

Ann Oper Res

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Data envelopment analysis (DEA) has witnessed increasing popularity in banking studies since 1985. In this paper, we propose a new DEA-based analysis framework with a regression-based feedback mechanism, where regression analysis provides DEA with feedback that informs about the relevance of the inputs and the outputs chosen by the analyst. Unlike previous studies, the DEA models used within the proposed framework could use both inputs and outputs, only inputs, or only outputs. So far, the UK banking sector remains relatively under researched despite its crucial importance to the UK economy. We use the proposed framework to address several research questions related to both the efficiency of the UK commercial banking sector and DEA analyses with and without regression-based feedback. Empirical results suggest that, on average, the commercial banks operating in the UK-whether domestic or foreign-are yet to achieve acceptable levels of overall technical efficiency, pure technical efficiency, and scale efficiency. On the other hand, DEA analyses with and without a linear regression-based feedback mechanism seem to provide consistent findings; however, in general DEA analyses without feedback tend to over-or under-estimate efficiency scores depending on the orientation of the analyses. Furthermore, in general, a linear regression-based feedback mechanism proves effective at improving discrimination in DEA analyses unless the initial choice of inputs and outputs is well informed.Keywords Data envelopment analysis · Efficiency · UK commercial banks · DEA models without explicit inputs · DEA models without explicit outputs

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Technical, Scale, and Allocative Efficiencies in U.S. Banking: An Empirical Investigation

Cited by 394 publications

References 16 publications

Technical and Scale Efficiencies for Chinese Rural Credit Cooperatives: A Bootstrapping Approach in Data Envelopment Analysis

Technical and Scale Efficiencies for Chinese Rural Credit Cooperatives: A Bootstrapping Approach in Data Envelopment Analysis

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

Assessing efficiency profiles of UK commercial banks: a DEA analysis with regression-based feedback

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