Bank modelling methodologies: A comparative non-parametric analysis of efficiency in the Japanese banking sector (original) (raw)
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2009
approved: _____________________________________________________________________ Victor J. Tremblay In this paper, I estimate efficiency and productivity change in the U.S. banking industry. The data consist of annual observations of 25 banks from 2004 to 2008. The paper follows a two-stage procedure. In the first-stage, utilizing the non-parametric methodologies, input-oriented Data Envelopment Analysis (DEA) model and DEA based Malmquist indices are used to estimate the efficiency scores for each bank in the sample. Further, the productivity index is decomposed into technical efficiency and technological change components. In the second-stage, I use Tobit censored regression to determine the impact of ‘environmental’ factors on banks’ efficiency. The results of DEA suggest that U.S. banks experienced an average annual productivity growth of almost 9 percent over the sample period as well as that the dominant source of efficiency is technological change (TC) which shows 10.8 percent...
A CONCEPTUAL FRAMEWORK FOR AND SURVEY OF BANKING EFFICIENCY STUDY1
2006
This paper provides a conceptual framework for the banking efficiency study and a survey of the previous banking efficiency literature. The discussions include the concept of efficiency measurement, different types of efficiency, methodology as well as the approaches of input and output variables. The possible bank efficiency determinants or factors that could explain the differences in efficiency of the bank are also discussed. The findings show that no estimation techniques dominate over the other with DEA widely used to measure the technical efficiency while SFA mostly used to measure the cost efficiency. The paper also found that the intermediation approach is the common approach used to decide the appropriate input and output variables.
Asean Economic Bulletin, 2003
Although considerable effort has been invested in the measurement of financial institution efficiency, hardly any empirical research has focussed on the properties and consistency of efficiency rankings derived from the data envelopment analysis (DEA) methodology. Following the seminal work of Bauer, Berger, Ferrier and Humphrey (1997), this paper employs data on Singaporean banking for the period 1993 to 1999 to develop efficiency scores and rankings for Singapore banks. It then invokes the five consistency conditions developed by to examine these scores and rankings. Our approach allows researchers to experiment with different models and select the most appropriate model for policy purposes.
DEPARTMENT OF ECONOMICS DISCUSSION PAPER SERIES Efficiency in Indonesian Banking: Recent Evidence
2009
In one of the first stand-alone studies covering the whole of the Indonesian banking industry, and utilising a unique dataset provided by the Indonesian central bank, this paper analyses the levels of intermediation-based efficiency obtaining during 2007. Using Tone’s (2001) input-oriented, non-parametric, slacks-based DEA model, and modifying it where necessary to deal with negative inputs and outputs (Sharp et al. 2006), we firstly estimate the relative average efficiencies of Indonesian banks, both overall, and by group, as determined by their total asset size and status. In the second part of the analysis, we adopt Simar and Wilson’s (2007) bootstrapping methodology to eliminate the ‘bias’ in the efficiency estimates and to formally test for the impact of size and status on Indonesian bank efficiency. The results from the initial analysis show that: (i) average bank efficiency within the industry during 2007 lay between 62% – 67%; (ii) the most efficient group of banks was the ‘...
Purpose -The purpose of this paper is to discuss a comprehensive literature survey of studies focusing on the efficiency and productivity of the banking sector using parametric and non-parametric frontier techniques. Design/methodology/approach -Critically reviewing 106 studies published across the world from 1994 to 2011, a conceptual framework is developed for the studies assessing the efficiency and productivity of the banking industry using non-parametric DEA frontier approach. Findings -Both the frontier approaches, parametric and non-parametric, are gaining an edge over the traditional financial performance measures. In the non-parametric approach, data envelopment analysis (DEA) is widely applied to measure a bank's efficiency and productivity. Studies conducted in developed countries such as the USA, the UK and Europe are now emerging with the new concepts of banking efficiency. Research limitations/implications -These findings are based only on the critical review of 106 studies. This study suggests the direction for future research and identifies the gap in existing literature with the development of a conceptual model. Originality/value -This study is original in nature and included literature published in recent issues of 2011. Efficiency and productivity QRFM 5,2 196 banking industry of developed nations like the USA, the UK, Europe. Developing nations are also gaining attention of researchers as within India only, 24 studies were conducted by the eminent researchers during pre and post liberalization periods of Indian banking sector (Bhattacharyya et al.
Measuring bank efficiency: tradition or sophistication? - A note
2009
The recent literature on measuring bank performance indicates a preference for sophisticated techniques over simple accounting ratios. We explore the results and relationships between bank efficiency estimates using accounting ratios and non-parametric DEA with bootstrap among Jamaican banks between 1998 and 2007. The results indicate different outcomes for the traditional accounting ratios and the sophisticated DEA methodology in the measurement of bank efficiency. GLS random effects two-variable regression tests for superiority using a risk index for insolvency suggest an advantage in favour of the DEA.
Evaluating the productive efficiency and performance of US commercial banks
Managerial Finance, 2002
In this study, we use a constrained multiplier, input-oriented, data envelopment analysis (DEA) model to evaluate the productive efficiency and performance of U.S. commercial banks from 1984 to 1998. We find strong and consistent relationships between efficiency and our inputs and outputs, as well as independent measures of bank performance. Further, our results suggest that the impact of varying economic conditions is mediated to some extent by the relative efficiencies of the banks that operate in these conditions. Finally, we find a close relationship exists between efficiency and soundness as determined by bank examiner ratings.
Study of Efficiency Measures in the Banking Sector-Quantitative Analysis with Qualitative Inferences
SIBR, 2011
Achievement of Efficiency is considered to be an important factor for all entities , yet it is a tricky one, primarily because it is measured in relative and comparative terms. For the financial sector , it has tremendous importance, having material benefits and losses too. Therefore it becomes an important benchmark of achievement. This study is first part of a series of studies to be continued in the efficiency measurement in the financial sector in Pakistan. The current study measures efficiency of fourteen select banks in the financial sector of Pakistan and addresses the interpretation of efficiency. It uses the parametric OLS technique, using the definition of efficiency and the set of variables chosen from the CAMEL rating system of the regulators of financial institutions. It further applies the non parametric Data Envelopment Analysis Approach to the sample and assesses their relative efficiency in terms of inputs and outputs of the intermediation approach. It discusses the results in the context of the background of the variables of assessment and their relationship to efficiency of banks. The study aims at finding a better view of performance in the financial sector for more reliable results.