Determinants of bank efficiency: The case of Brazil

This paper analyzes the efficiency of the Brazilian banking sector over the post-privatization period of 2000–2007. We employ a Bayesian stochastic frontier approach, which provides exact efficiency estimates and confidence intervals and thus, allows an accurate comparison across institutions and bank groups. The results suggest that large banks are the most cost and profit efficient, supporting the concentration process observed in recent years. Foreign banks have achieved a good performance through either the establishment of new affiliates and the acquisition of local banks. The remaining public banks have had improvements in cost efficiency, but are relatively profit inefficient. Finally, we observe a positive impact of capitalization on efficiency.     

Effects of heterogeneity on bank efficiency scores

Bank efficiency estimates often serve as a proxy of managerial skill since they quantify sub-optimal production choices. But such deviations can also be due to omitted systematic differences among banks. In this study, we examine the effects of heterogeneity on bank efficiency scores. We compare different specifications of a stochastic cost and alternative profit frontier model with a baseline specification. After conducting a specification test, we discuss heterogeneity effects on efficiency levels, ranks and the tails of the efficiency distribution. We find that heterogeneity controls influence both banks’ optimal costs and profits and their ability to be efficient. Differences in efficiency scores are important for more than only methodological reasons. First, different ways of accounting for heterogeneity result in estimates of foregone profits and additional costs that are significantly different from what we infer from our general specification. Second, banks are significantly re-ranked when their efficiency is estimated with a specification other than the preferred, general specification. Third, the general specification gives the most reliable estimates of the probability of distress, although differences to the other specifications are low.     

基于数据包络分析方法的上市银行盈利效率研究

银行是我国金融市场的主导力量。银行的一举一动对金融市场,乃至整体经济运行均有重要的影响。特别是在经济进入新常态,金融深化改革的新环境下,研究银行的效率,既是银行发展的内在需要,也是宏观经济的必然需求。本文基于银行所有者的角度,以资本金和不良贷款作为投入,利息收入和非利息收入作为产出,测算2015年16家上市银行的盈利效率,结果表明:上市银行盈利的纯技术效率普遍较高,规模效率受规模因素影响较显著;国有商业银行的规模效率低,导致其技术效率偏低。对于大型银行,规模已经成为影响盈利技术效率的重要因素之一。     

A circular global profit Malmquist productivity index in data envelopment analysis

To remove the difficulty caused by different profit frontiers in different periods of time for calculating profit efficiency changes and its components, this paper proposes a circular global profit Malmquist productivity index. This index is applicable when the input costs and output prices are known and when producers seek to maximize the total profit of their decision making units (DMUs). To this end, first, two methods are introduced to obtain the common costs and prices with or without the decision maker’s preferences, and then, a common profit efficient frontier is obtained. The proposed index can be decomposed into several circular components, viz., profit efficiency change, profit technical change, technical efficiency change, allocative efficiency change, technical change, and cost/price change. The proposed index is then generalised to compare the productivity of two different units at two different points in time. The global profit Malmquist productivity index developed here is unique and is computed using nonparametric linear programming model known as data envelopment analysis (DEA), and there is no need to resort to the geometric mean in the calculation. To illustrate the proposed index and its components, numerical examples at three successive periods of time are given.     

基于两阶段DEA方法的中国商业银行效率评价

本文考虑商业银行吸收存款和发放贷款的两阶段特点,引入“顾客满意度”这一产出指标,应用两阶段DEA模型计算了我国15家商业银行在2008年和2011年的服务质量效率和盈利效率,结果显示我国商业银行的盈利效率显著高于服务质量效率。进而综合考虑服务和盈利指标,分析了各银行的综合效率,并通过计算各银行Malmquist指数研究我国商业银行2008年到2011年间的效率变化。结果表明:各商业银行从2008年到2011年的效率整体呈上升趋势,各商业银行的技术效率以及整个银行业的效率都有一定的提高。最后,应用Tobit模型分析了影响银行效率的因素,结果显示银行的贷存比、资产利润率和不良贷款率对效率影响显著。     

Multiple goals and ownership structure: Effects on the performance of Spanish savings banks

Spanish savings banks (SBs) are financial institutions with a wide mission that includes different stakeholders’ goals. Profit maximization is only one among several goals, and the widespread use of cost or profit efficiency as the only comparative performance measure may prove to be insufficient in this context. To overcome this problem, we build an aggregate performance index for organizations with multiple goals. Furthermore, we show how the ownership structure of SBs influences their economic behavior in two basic ways: (1) the performance level and (2) their goal priorities. In particular, we distinguish two types of ownership structures in our application, namely, organizations controlled by Public Administrations and those controlled by insiders (i.e. managers and workers). Our results indicate that each type has different priorities and differ in their performance indexes. More specifically, the empirical analysis shows that insider-controlled SBs favor goals related to profit maximization and the universal access to financial services and, furthermore, they perform better. In contrast, contributing to regional development becomes the most favored goal when Public Administrations have a majority in the bank.     

Radial and non-radial decompositions of profit change: With an application to Indian banking

Grifell-Tatje and Lovell [Grifell-Tatje, E., Lovell, C.A.K., 1999. Profits and productivity. Management Science 45, 1177–1193] made significant contributions to the literature on the extended radial DEA framework by decomposing profit change into six mutually exclusive components. Their approach, however, poses two basic problems. First, the radial estimates on these components might give conflicting signals about the direction of profit change after the full radial efficiencies are achieved when slacks are present. Second, evaluations of these components, using base-period prices as weights, can be potentially misleading. To address these concerns, we first introduce non-radial DEA models, and then, provide a few strong theoretical arguments in favor of using as weights either current-period prices or an average price covering both periods to value the contributions of each of these components. The Indian banking sector is taken as a case study to illustrate the radial and non-radial decompositions of profit change so as to empirically examine the role of competition on profit change and its drivers. Our broad empirical results are as follows: first, radial and non-radial models yield diametrically opposite results on the contributions of various components. Second, the increasing efficiency change trends in all ownership groups after 2002 indicate that the Government reform process instituted on the banking industry has had a favorable effect on the performance of the Indian banking sector. Third, despite the fact that nationalized banks are the oldest banks, their output and resource allocation behaviors do not reflect their learning experience.     

Decomposing capacity utilization in data envelopment analysis: An application to banks in India

This paper briefly reviews the existing methods of capacity utilization in nonparametric framework from economic perspectives, and then suggests an alternative in the light of limitations therein. In the spirit of work by Coelli et al. [Coelli, T.J., Grifell-Tatje, E., Perelman, S., 2002. Capacity utilisation and profitability: A decomposition of short run profit efficiency. International Journal of Production Economics 79, 261–278], we propose two methods, radial and non-radial, to decompose the input-based physical (technological) capacity utilization into various meaningful components viz., technical inefficiency, ray economic capacity utilization and optimal capacity idleness. A case study of Indian banking industry is taken as an example to illustrate the potential application of these two methods of decomposition. Our two broad empirical findings are that first, competition created after financial sector reforms generates high efficiency growth, and reduces excess capacity; second, the cost gap of the short-run cost from the actual cost is higher for the nationalized banks over the private banks indicating that the former banks, though old, do not reflect their learning experience in their cost minimizing behavior.     

Technical efficiency and economies of scale in state owned enterprises: The Hellenic telecommunications organisation

In this paper we propose methodologies for assessing the relative efficiency of state owned enterprises that operate under monopolistic conditions. Irrespective of the ownership structure (private or public) monopolistic operation is often given unclear/conflicting operating objectives by their principals or regulators and thus efficiency should be assessed using alternative objectives such as cost, production and revenue. On the methodological side the paper employs parametric functional forms using ordinary least squares and goal programming methods of estimation. A secondary estimation stage was also pursued with the input/output variables of the models being corrected for technical inefficiency. The methodology was applied to examine the technical efficiency and economies of scale of the Hellenic telecommunications organisation over the period 1971–1993.     

Comparative analysis of banking production frameworks in eastern european financial markets

This paper performs comparative analysis of the non-radial Russell output technical efficiency measures of 13 Eastern European banking systems assuming a banking production with risk as an undesirable output and where output components can be negative. This is analysed utilizing three modelling specifications; the intermediation, production and profit methodologies. Along with distribution and inter-distribution mobility analysis of the efficiency scores across alternative methodologies, we also estimate and statistically compare the distributions of estimated efficiency scores using the bootstrap-based Simar–Zelenyuk-adapted-Li test. The results suggest that although the efficiency levels differ across the approaches, change in positions of the banks relative to the mean is not substantial across the three methodologies.     

A hybrid intelligent system for predicting bank holding structures

A composite model of neural network and rough sets components was constructed to predict a sample of bank holding patterns. The final model was able to correctly classify 96% of a testing set of four types of bank holding structures. Holding structure is defined as the number of banks under common ownership. For this study, forms of bank holding structure include: banks that are not owned by another company, single banks that are held by another firm, pairs of banks that are held by another enterprise, and three or more banks that are held by another company. Initially, input to the neural network model was 28 financial ratios for more than 200 banks in Arkansas for 1992. The 28 ratios are organized by categories such as liquidity, credit risk, leverage, efficiency, and profitability. The ratios were constructed with 70 bank variables such as net worth, deposits, total assets, net loans, total operating income, etc. The first neural network model correctly classified 84% of the testing set at a tolerance level of 0.20. Another artificial intelligence (AI) procedure known as two-dimensional rough sets was then applied to the dataset. Rough sets reduced the number of input variables from 28 to 18, a drop of 36% in the number of input variables. This version of rough sets also eliminated a number of records, thereby reducing the information system (i.e., matrix) on both vertical and horizontal dimensions. A second neural network was trained with the reduced number of input variables and records. This network correctly classified 96% of the testing set at a tolerance level of 0.20, an increase of 11% in the accuracy of the prediction. By applying two-dimensional reducts to the dataset of financial ratios, the predictive accuracy of the neural network model was improved substantially. Banking institutions that are prime candidates for mergers or acquisitions can then be more accurately identified through the use of this hybrid decision support system (DSS) which combines different types of AI techniques for the purposes of data management and modeling.     

Evolution of bank efficiency in Brazil: A DEA approach

This paper investigates cost, technical and allocative efficiencies for Brazilian banks in the recent period (2000–2007). We use Data Envelopment Analysis (DEA) to compute efficiency scores. Brazilian banks were found to have low levels of economic (cost) efficiency compared to banks in Europe and in the US. For the period with high macroeconomic volatility (2000–2002) the economic inefficiency in Brazilian banks can be attributed mainly to technical inefficiency rather than allocative inefficiency. State-owned banks are significantly more cost efficient than foreign, private domestic and private with foreign participation. There is no evidence of differences in economic efficiency due to type of activity and bank size. These results may provide some useful guidance for financial regulators and bank managers.     

Product availability in competitive and cooperative dual-channel distribution with stock-out based substitution

This paper investigates the impact of customers’ stock-out based substitution on the product availability and the channel efficiency of a dual-channel supply chain, which consists of a supplier distributing a single product to customers through both its wholly owned direct channel and an independent retailer. The supplier and its retailer, with the objective of optimizing their own profit, simultaneously choose their own base-stock level to satisfy the stochastic demand from the customers whose channel preferences are heterogeneous and may be affected by each channel’s product availability. The customers dynamically substitute between the two channels in the event of a stock-out. The result shows that the effect of the stock-out based substitution may increase or decrease the efficiency of a decentralized supply chain. It is found that while the integrated supplier–retailer may consolidate the base-stock levels to benefit from stock-out based substitution, the independent supplier and retailer are more inattentive to customers’ stock-out based substitution. Thus, the competitive base-stock levels of the decentralized dual-channel supply chain rarely agree with the system optimal levels. Various contracts are examined to shed light on channel coordination mechanisms. In addition, it is shown that the channel efficiency of the dual-channel distribution can be improved by the emergence of Stackelberg leadership from either the supplier or the retailer.     

基于区间效率的贷款定价研究

以存款利息支出率、费用支出率、预期违约损失率、目标利润率等4个定价指标作为输入,以贷款利率作为输出,采用支持向量机回归算法建立基于区间效率的贷款定价模型.创新与特色一是通过区间数形式来反映预期违约损失率、目标利润率、费用支出率等,改变了现有研究将目标利润、贷款费用、违约损失等变量看作确定性数值来定价的现状.使贷款利率更具有竞争性.二是通过比较不同核函数、核参数下的训练样本的贷款效率区间与合理的贷款效率区间的匹配程度,确定贷款定价模型最优的核函数和核参数,进而建立了贷款定价模型.间接解决了在考虑贷款价格能否被银行、客户接受情况下贷款利率确定的问题.     

考虑服务水平的商业银行综合效率评价研究

商业银行是我国银行体系的主体,提高银行的经营效率和服务水平是当前金融改革的重点。已有的研究较多关注于银行的收益,对银行的非期望产出如呆坏账及服务水平等关注较少。本文运用多个处理非期望产出的DEA模型,对2008年中国商业银行的效率进行了评价分析。文章在改进熵DEA方法的基础上,利用指标体系对商业银行的综合效率进行了测度并对比了处于多模型条件下模型的区分度问题。研究结果显示,呆坏账、服务水平(等待时间)等非期望产出对商业银行的效率意义重大;股份制商业银行的效率普遍高于国有商业银行,因此国有商业银行的股份制改造是一个积极的方向。最后,根据实证分析的结果提出的效率改进建议对商业银行的自身发展和管理当局的改革规划都具有重要的指导意义。     

Smoothing combined generalized estimating equations in quantile partially linear additive models with longitudinal data

This paper develops a robust and efficient estimation procedure for quantile partially linear additive models with longitudinal data, where the nonparametric components are approximated by B spline basis functions. The proposed approach can incorporate the correlation structure between repeated measures to improve estimation efficiency. Moreover, the new method is empirically shown to be much more efficient and robust than the popular generalized estimating equations method for non-normal correlated random errors. However, the proposed estimating functions are non-smooth and non-convex. In order to reduce computational burdens, we apply the induced smoothing method for fast and accurate computation of the parameter estimates and its asymptotic covariance. Under some regularity conditions, we establish the asymptotically normal distribution of the estimators for the parametric components and the convergence rate of the estimators for the nonparametric functions. Furthermore, a variable selection procedure based on smooth-threshold estimating equations is developed to simultaneously identify non-zero parametric and nonparametric components. Finally, simulation studies have been conducted to evaluate the finite sample performance of the proposed method, and a real data example is analyzed to illustrate the application of the proposed method.     

The technical efficiency of vacuum-pan sugar industry of India: An application of a stochastic frontier production function using panel data

A stochastic production frontier method is used to examine technical efficiency among Indian vacuum-pan sugar factories over a five-year period. Most factories are close to Indian best practice in terms of technical efficiency. Smaller firms and firms with access to sweeter cane are likely to be more efficient than other firms, while publicly owned firms are less efficient. There are transitory positive effects of a long crushing season on technical efficiency.     

Firm and industry level profit efficiency analysis using absolute and uniform shadow prices

We discuss the nonparametric approach to profit efficiency analysis at the firm and industry levels in the absence of complete price information. Two new insights are developed. First, we measure profit inefficiency in monetary terms using absolute shadow prices. Second, we evaluate all firms using the same input–output prices. This allows us to aggregate firm-level profit inefficiencies to the overall industry inefficiency. Besides the measurement of profit losses, the presented approach enables one to recover absolute price information from quantity data. We conduct a series of Monte Carlo simulations to study the performance of the proposed approach in controlled production environments.     

A bootstrap approach to analyse productivity growth in European banking

This paper analyses productivity growth for European banks over the 1995–2001 period. In contrast to previous literature, our study covers the majority of current European Union (EU) countries—all except Greece and those joining the EU in 2004. We also use resampling methods so as to gain statistical precision, which turns out to be especially important due to the limitations of the database. In order to be consistent, we use additional nonparametric methods to disentangle why productivity differentials might exist. Results show that productivity growth has occurred in most countries, mainly due to improvements in production possibilities. The bootstrap analysis yields further evidence given that for many firms and countries productivity growth or decline is not statistically significant. The two-stage analysis provides some extra insights, suggesting that the relevance of environmental variables found in other studies focusing on efficiency could be lessened when focusing on productivity.     

Foreign versus domestic banks’ performance in the UK: a multicriteria approach

Although the banking sector in the UK is one of the most open and it is characterized by an increasing foreign bank presence, it remains relatively under-researched compared to studies for other countries. The objective of this paper is to investigate the performance of the UK banking sector focusing on the performance of the domestic banks as opposed to the performance of the foreign banks in order to test the hypothesis of higher performance of the domestic banks in a developed market. For this purpose, the UTADIS multicriteria methodology is employed to compare domestic and foreign banks performance over multiple criteria, such as profitability, liquidity, risk and efficiency, using a data sample covering 26 domestic and 32 foreign banks operating in the UK over the period 1998 to 2001. The results of the study, support the home advantage hypothesis, suggesting that the higher performance of domestic banks compared to foreign banks is also the case in the UK. The most important distinguishing performance factors between the two groups of banks are interest revenue to total earning assets, and profit before taxes to loans plus securities, which are higher for the domestic banks.AMS classification: 91B28