ANALYZE BANKING EFFICIENCY FROM AN INTERNATIONAL PERSPECTIVE (original) (raw)

Abstract

In this paper we study the performance and the efficiency of the banking sectors from an international perspective. Exploring key factors influencing bank profitability is of crucial importance to improve bank internal management and implement effective banking policies. A mathematical evaluation method is proposed for this study. This method is easy to apply and uses a linear programming model. The weights for various measurements are determined by objective method and are standard. The method is illustrated with real data from twenty-five developed countries worldwide.

Key takeaways

sparkles

AI

  1. The study compares banking efficiency across 25 OECD countries, focusing on key institutional factors.
  2. Five indicators assess country-level differences: legal environment, macroeconomic conditions, banking system accessibility, size, and profitability.
  3. Strong legal rights correlate positively with banking efficiency, enhancing loan availability and favorable credit terms.
  4. Bank size, measured by assets to GDP ratio, shows significant relationship with profitability and efficiency.
  5. Accessibility metrics, like bank branches and ATMs per capita, directly impact banking efficiency and profitability.

Loading...

Loading Preview

Sorry, preview is currently unavailable. You can download the paper by clicking the button above.

References (21)

  1. Abdullah, Z. (1985). A Critical Review of the Impact of ATMs in Malaysia. Banker's Journal Malaysia, 28, 13-16.
  2. Abreu, M., & Mendes, V. (2002). Commercial Bank Interest Margins and Profitability: Evidence from E.U. Countries. Working Paper Series, Porto.
  3. Athanasoglou, P., Brissimis, S., & Delis, M., (2008). Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money, 18 (2), 121-136.
  4. Berg, S., Førsund, F., Hjalmarson, L. and Suominen, M. (1993). Banking Efficiency in the Nordic Countries. Journal of Banking and Finance, 17, 371-88.
  5. Berger, A.N. (2007). International Comparisons of Banking Efficiency. Financial Markets, Institutions & Instruments, 16, 119-144.
  6. Berger, A.N. & Humphrey, D.B. (1997). Efficiency of Financial Institutions: International Survey and Directions for Future Research. European Journal of Operational Research, 98, 175 -212.
  7. Berger, A.N. & Mester, L. (2003). Explaining the Dramatic Changes in Performance of US Banks: Technological Change, Deregulation, and Dynamic Changes in Competition. Journal of Financial Intermediation, 12, 57-95.
  8. Beck, T., Demirguc-Kunt, A. & Levine, R. (2006). Bank supervision and corruption in lending. Journal of Monetary Economics, Elsevier, 53(8), 2131-2163.
  9. Beck, T.H.L., Demirgüc-Kunt, A., & Levine, R. (2010). Financial institutions and markets across countries and over time: The updated financial development and structure database. World Bank Economic Review, 24(1), 77- 92.
  10. Bems, R. & P. Sorsa (2008). Efficiency of the Slovene Banking Sector in the EU context. Journal for Money and Banking (Bančni Vestnik), 57 (11), November.
  11. Chan, S. & Karim M. (2010). Bank efficiency, profitability and equity capital: evidence from developing countries. American Journal of Finance and Accounting, 2 (2) 181-195.
  12. Dietsch, M. & Lozano-Vivas, A. (2000). How the Environment Determines Banking Efficiency: A comparison between French and Spanish industries. Journal of Banking and Finance, 24, 985-1004.
  13. Feng, G. & Serletis, A. (2010). Efficiency, Technical Change, and Returns to Scale in Large US Banks: Panel Data Evidence from an Output Distance Function Satisfying Theoretical Regularity. Journal of Banking & Finance, 34(1), 127-138.
  14. Holló, D. & Nagy, M. (2006). Bank Efficiency in the Enlarged European Union. MNB Working Papers, No. 2006/3, Magyar Nemzeti Bank, Budapest.
  15. Holden, K. & El-Bannany, M. (2006). Investment in Information Technology Systems and Other Determinants of Bank Profitability in the UK. Paper retrieved on May 10, 2012 from http://www.clicktoconvert.com.
  16. Hughes, J. P., Mester, L. J., & Moon, C. (2001). Are Scale Economies in Banking Elusive or Illusive?: Evidence obtained by Incorporating Capital Structure and Risk-Taking into Models of Bank Production. Journal of Banking & Finance, 25 (12), 2169-2208.
  17. La Porta, R., Lopez-de-Silanes, F., Shleifer, A. & Vishny, R. (1997). Legal Determinants of External Finance. The Journal of Finance, 52(3), 1131-1150.
  18. Naceur, S. (2003). The Determinants of the Tunisian Banking Industry Profitability: Panel Evidence, Working Paper. Retrieved Aug.24, 2011 from http://www.mafhoum.com/press6/174E11.pdf
  19. Pasiouras, F., & Kosmidou, K. (2007). Factors influencing the profitability of domestic and foreign commercial banks in the European Union. Research in International Business and Finance, 21 (2), 222-237.
  20. Qian, J. & Strahan, P. (2007). How Laws and Institutions Shape Financial Contracts: The Case of Bank Loans. The Journal of Finance, 62(6), 2803-2834.
  21. Wheelock, D. & Wilson, P. (2009). Are U.S. Banks Too Large? Working paper, 2009-054-A, Federal Reserve Bank of St. Louis Research Division.