has regulatory reform had any impact on bank efficiency in indonesia a two stage analysis abstractmore than a decade following the severe economic crisis 1997 indonesia has undergone major regulatory changes in its banking industry this article examines the impact of these regulatory changes on the relative technical efficiency te of the indonesian banking industry employing data envelopment analysis dea and censored tobit regression model additionally the bootstrap approach of simar and wilson is employed to provide statistical properties to the dea efficiency score the findings show that the industry on average is inefficient over the period of analysis also state owned and foreign owned banks are found to be more efficient than any other group of banks finally the impact of regulatory reforms is generally positive and statistically significant

effects of illegal behavior on the financial performance of us banking institutions this study investigates whether financial performance is affected by corporate violations of laws and regulations in a sample of 128 publicly traded banks that were subject to enforcement actions by us regulatory authorities over a 20 year period we observed a significant negative market reaction pursuant to the violations however the market reaction did not vary meaningfully in accordance with the severity or repetitiveness of the violation the results of this study are in conformity with previous research on industries other than banking notably with regard to negative market reaction this confirms that shareholders in the banking industry react in a manner considerably similar to their counterparts in other industries

explaining bank distress in eastern european transition economies abstract this paper considers the joint role of macroeconomic structural and bank specific factors in explaining the occurrence of banking problems in the nineteen eastern european transition countries over the last decade with data at the individual bank level we show using a discrete time survival model that all three factors interact in their impact and have a rich dynamic profile which underlines the highly volatile cycles challenging the stability of banks in this region a fragile funding basis accompanied by high exposure to market risk in an environment of reforms and macroeconomic disturbances is the typical precursor of bank distress

regional growth and finance in europe is there a quality effect of bank efficiency abstract in this study we test whether regional growth in 11 european countries depends on financial development and suggest the use of cost and profit efficiency estimates as quality measures of financial institutions contrary to the usual quantitative proxies of financial development the quality of financial institutions is measured in this study as the relative ability of banks to intermediate funds an improvement in bank efficiency spurs five times more regional growth then an identical increase in credit does more credit provided by efficient banks exerts an independent growth effect in addition to direct quantity and quality channel effects

nontraditional activities and the efficiency of us commercial banks abstract in recent years an increasing portion of bank income has been generated through nontraditional activities most studies of bank efficiency do not include any measure of nontraditional activities when measuring outputs in this paper cost revenue and profit efficiency are estimated by using models with and without nontraditional output the results suggest that the standard model which omits nontraditional output understates bank efficiency evidence also surfaces that based on efficiency the relative ranking of individual banks changes when nontraditional activities are included as a type of output

bank failure risk different now abstract motivated by the debate over similarities between the current and previous financial crises logit estimates reveal significantly changed linkages between observable financial ratios and probabilities of subsequent bank failure using us data from the 1980s and 2008

analysing the determinants of performance of best and worst european banks a mixed logit approach abstract using a dataset of 7635 observations on 1384 commercial banks operating in the eu between 1993 and 2001 we utilise a mixed logit model to identify factors that explain the probability of a bank being a best worst performer the empirical evidence confirms the importance of country level characteristics location and legal tradition and firm level features bank ownership balance sheet structure and size specifically smaller sized banks with higher loan intensity and foreign banks from countries upholding common law traditions have a higher probability of best performance

x efficiency in banking looking beyond the balance sheet the distribution free and stochastic frontier estimation methods are used to derive bank specific measures of cost and profit xefficiency this is done to investigate the importance of including aggregate measures of off balance sheet obs activities the results indicate that economic cost and production cost x efficiency estimates increase with the inclusion of the obs measure profit xefficiency estimates are largely unaffected further the composition of bankso obs activities appears to help explain interbank differences in cost and profit x efficiency estimates whereas bank size and the mix between on and off balance sheet banking activities are largely uncorrelated with the x efficiency estimates

property rights in a fishery regulatory change and firm performance a new method is introduced and applied to the british columbia halibut fishery to analyze changes in productivity of firms harvesting a natural capital stock the index number technique decomposes the contributions of output prices variable input prices fixed inputs and productivity to firm profits adjusted for changes in the natural capital stock an application of the method is given using micro level data from a common pool resource the indexes provide a ready made comparison of all firms to the most profitable firm per unit of resource stock benchmarking with the decompositions also allows firms and regulators to improve overall industry performance by allowing them to analyze what components are contributing most to relative economic profits

does short term debt increase vulnerability to crisis evidence from the east asian financial crisis abstract does short term debt increase vulnerability to financial crisis or does short term debt reflect rather than cause the incipient crisis we study the role that short term debt played in the collapse of the east asian financial sector in 1997 1998 we alleviate concerns about the endogeneity of short term debt by using long term debt obligations that matured during the crisis we find that debt obligations issued at least three years before the crisis had a negative albeit sometimes insignificant effect on the probability of failure our results are consistent with the view that short term debt reflects rather than causes distress in financial institutions

financial distress drivers in brazilian banks a dynamic slacks approach abstract this study applies the dynamic slacks based model dsbm developed by tone and tsutsui 2010 in order to assess the evolution of input saving output increasing potentials in major brazilian banks from 1996 to 2011 we propose that these potentials or slacks can be used as proxies for an eventual financial distress situation in the future the main research objective is to determine whether or not different characteristics of bank type related to ownership size and merger and acquisition processes are significantly related to inefficiency levels and by extension to an eventual financial distress situation since higher inefficiency levels also imply lower input saving output decreasing potentials based on a balanced panel model secondary data from economatica were collected and analyzed results indicate higher inefficiency levels and slacks in small public and national banks policy implications are also addressed

the effectiveness of tarp cpp on the us banking industry a new copula based approach following the 2008 financial crisis regulatory authorities and governments provided distressed banks with equity infusions in order to strengthen national banking systems however the effectiveness of these interventions for financial stability has not been extensively researched in the literature in order to understand the effectiveness of these bailouts for the solvency of banks this paper proposes a new model the longitudinal binary generalised extreme value lobgev model differing from the existing models the lobgev model allows us to analyse the temporal structure of the probability of failure for banks for both those that received a bailout and for those that did not in particular it encompasses both the flexibility of the d vine copula and the accuracy of the generalised extreme value model in estimating the probability of bank failure and of banks receiving approval for capital injection we apply this new model to the us banking system from 2008 to 2013 in order to investigate how and to what extent the troubled asset relief program tarp capital purchase program cpp reduced the probability of the failure of commercial banks we specifically identify a set of macroeconomic and bank specific factors that affect the probability of bank failure for tarp ccp recipients and for those that did not receive capital under tarp ccp our results suggest that tarp cpp provided only short term relief for us commercial banks

efficiency and economies of scale of large canadian banks the authors measure the economies of scale of canada s six largest banks and their costefficiency over time using a unique panel data set from 1983 to 2003 they estimate pooled translog cost functions and derive measures of relative efficiency and economies of scale

financial crises in asia and latin america then and now in this paper we analyze the extent to which past financial crises share common characteristics in latin america asia europe and the middle east we examine the recent crises in asia and in latin america in particular their severity to assess whether the considerable historical differences that we have documented for the earlier sample have eroded we conclude that in a deregulated world the well behaved asian financia1 crises are a relic of the past

banks responses to deregulation profits technology and efficiency the deregulation of interest rates in the early 1980s raised bank funding costs and lowered profits in response banks raised fees for deposit services reduced branch operating costs and shifted to higher earning assets rates of return did not regain their prederegulation levels until the early 1990s our goal is to decompose the change in bank profits following deregulation into i intemal bank initiated adjustments to the new regulatory structure and ii external contemporaneous changes in banks business environment this decomposition will depend in part on the assumed competitive structure of the banking industry with perfect competition output and input prices are part of the external environment and banks responses are limited to changes in output and input quantities an alternative approach assumes imperfect competition where banks have some control over output prices deposit fees minimum balance requirements and interest rates on certain loans and output quantities and input prices comprise the external environment the altemative model is supported by the data using this model large banks but not smaller banks are found to have relied primarily on changing output prices and input use to mitigate and reverse the negative effects of deregulation on profits the adjustment to deregulation was essentially complete after four years following this additional changes in bank profitability during the late 1980s were primarily due to changes in banks business environment

enjoying the quiet life under deregulation not quite summary most empirical studies in the banking literature assume that the alternative profit function is linearly homogeneous in input prices we show that such an assumption is theoretically unwarranted and that its use may yield misleading results we use koetter et al review of economics and statistics 2012 94 2 462 480 as a benchmark to showcase how empirical results can be sensitive to the linear homogeneity assumption contrary to koetter et al we find a positive relation between market power and profit efficiency when this assumption is dropped this relation is slightly weakened after the wave of intrastate and interstate deregulation but not enough to support the quiet life hypothesis copyright 2014 john wiley sons ltd

how did bank holding companies prosper in the 1990s abstract this paper examines the improved performance of us bank holding companies bhcs from 1991 to 1997 analysis of cost and profit functions using several alternative output specifications suggests that the gains were primarily due to productivity growth and changes in scale economies various econometric methodologies yield productivity growth of about 0 4 per year and the optimal size seems to have increased in the 1990s era of deregulation technological change and financial innovation estimates of both productivity growth and economies of scale are robust across traditional and non traditional output specifications despite the overall success however substantial cost and profit inefficiency existed for bhcs of all sizes in the 1990s these efficiency estimates are particularly sensitive to the output specification and failure to account for non traditional activities like off balance sheet obs items leads profit efficiency but not cost efficiency to be understated for the largest bhcs

bank failures and bank fundamentals a comparative analysis of latin america and east asia during the nineties using bank level data abstract this paper uses bank level data from recent banking crises in east asia and latin america to address the following two questions 1 to what extent did individual bank conditions explain the failures 2 in terms of their fundamentals was it mainly the weak banks ex ante that failed in the crisis countries the results show that for the two regions bank level fundamentals significantly affect the likelihood of collapse for these banks systemic shocks both macroeconomic and liquidity that triggered the crises mainly destabilized the weak banks ex ante particularly in east asia which raises questions about the role that regional differences play for the degree of banking sector resilience to systemic shocks in the financial and macroeconomic environment

the risk of financial intermediaries this paper reconsiders the formal estimation of bank risk using the variability of the profit function in our model point estimates of the variability of profits are derived from a model where this variability is endogenous to other bank characteristics such as capital and liquidity we estimate the new model on the entire panel of us banks spanning the period 1985q1 2012q4 the findings show that bank risk was fairly stable up to 2001 and accelerated quickly thereafter up to 2007 we also establish that the risk of the relatively large banks and banks that failed in the subprime crisis is higher than the industry s average thus we provide a new leading indicator which is able to forecast future solvency problems of banks

mergers and technical efficiency in spanish savings banks a stochastic distance function approach abstract the aim of this paper is to test the temporal variation of technical efficiency of spanish savings banks during the period 1985 1998 furthermore we test whether merged and non merged firms have different levels and temporal patterns of technical efficiency a stochastic output distance function r w shephard theory of cost and production functions princeton university press princeton nj is employed to accommodate multiple output technology the distance function provides the advantage that it does not need information about prices so it can accommodate the multi product nature of the financial sector only using the quantities as data an important point when the assumptions about perfectly competitive markets are unlikely to be met the temporal variation of efficiency is modeled extending the battese and coelli journal of productivity analysis 3 1992 153 169 approach in two ways relaxing the monotonicity of the temporal variation pattern of the efficiency term and allowing for different patterns of efficiency change between merged and non merged firms

financial sector liberalization bank privatization and efficiency evidence from pakistan abstract the pakistani banking system has been transformed over the past 15 years through liberalization the entry of private banks the privatization of public sector banks and the tightening of prudential regulations the effects of these changes on bank productivity and relative efficiency are investigated using various techniques bank productivity in terms of profits has increased and new entrants have been efficient but the dispersion of efficiency remains wide the privatized banks improved their profit efficiency in the period immediately following their privatization but in the subsequent years only one significantly improved its efficiency whereas the other did not differentiate itself in terms of efficiency from the remaining state owned banks the new private domestic banks generally proved to be among the most efficient and sometimes out performed the foreign banks

deregulation ownership and productivity growth in the banking industry evidence from india this paper analyzes the relationship between deregulation and total factor productivity tfp growth in the indian banking industry using a generalized shadow cost function approach tfp growth is decomposed into a technological change a scale and a miscellaneous component a disaggregated panel data analysis using the population of public and private banks over 1985 96 that covers both pre and post deregulation periods indicates that a significant decline in regulatory distortions and the anticipated increase in tfp growth have not yet materialized following deregulation while private sector banks have improved their performance mainly due to the freedom to expand output public sector banks have not responded well to the deregulation measures

a note on savings and loan ownership structure and expense preference a re examination this study extends the work of akella and greenbaum journal of banking finance 12 1988 419 through the use of a much larger nationwide sample of us saving and loan associations and supports their original finding of significant expense preference behavior in mutual savings and loans during their original study period 1979 80 this study also provides evidence that over the time period of substantial deregulation and changes in the competitive environment in the us financial services industry expense preference behavior for savings and loans decreased the results are consistent with the idea that the removal of barriers that restrict competition should improve managerial efficiency in firms that survive 2003 elsevier b v all rights reserved

hierarchies of processors with endogenous capacity abstract capacity is defined as the number of information items a processor can handle in a given time this note studies the properties of a hierarchy of processors in which the capacities of processors are choice variables the hierarchy must pay each processor it decides to employ a wage which is an increasing function of the processor s capacity it is shown that efficient hierarchies tend to be characterized by three simple properties i within any given level capacity is uniform ii across levels the higher the level the higher the capacity and iii no skip level reporting occurs journal of economic literatureclassification numbers d21 j31 l23

liquidity shortages and banking crises we show in this article that bank failures can be contagious unlike earlier work where contagion stems from depositor panics or contractual links between banks we argue that bank failures can shrink the common pool of liquidity creating or exacerbating aggregate liquidity shortages this could lead to a contagion of failures and a total meltdown of the system given the costs of a meltdown there is a possible role for government intervention unfortunately liquidity and solvency problems interact and can cause each other making it hard to determine the cause of a crisis we propose a robust sequence of intervention banks are often found at the center of systemic financial crises the causes of these crises have long been debated do they stem from depositor panics or do they arise because bank balance sheets are exposed to common factors if it is the latter then is there any sense in which bank failures can be contagious can anything be done to prevent these crises or stop them from propagating once they begin our purpose in this paper is to reexamine whether bank failures can start and propagate systemic crises even if we assume that depositors do not panic that is even if depositors actions are coordinated and they do not run simply because they fear others will run our focus is not because we think that panics are empirically unimportant the jury is still out on that instead we show that contagion can stem from an underlying real general equilibrium problem rather than just from lack of coordination among depositors from a policy perspective attempts to reassure investors through confidence building measures will not work if panic and lack of coordination are not the reasons for a crisis we begin in this paper with a model of a bank that we developed in diamond and rajan 2001 assets in this model are illiquid they cannot be borrowed against or sold for the full value of resources they will generate in their best use because the human capital necessary to generate that full value cannot

contagion and bank failures during the great depression the june 1932 chicago banking panic the authors examine the social costs of asymmetric information induced bank panics in an environment without government deposit insurance their case study is the chicago bank panic of june 1932 the authors compare the ex ante characteristics of panic failures and panic survivors despite temporary confusion about bank asset quality on the part of depositors during the panic which was associated with widespread depositor runs and bank stock price declines the panic did not produce significant social costs in terms of failures among solvent banks copyright 1997 by american economic association

trends in efficiency in response to regulatory reforms the case of indian and pakistani commercial banks this paper attempts to estimate trends in the efficiency levels of indian and pakistani commercial banks between 1985 and 2003 a time period which encompasses two phases of significant change to the regulation of the financial sector in both countries our efficiency estimates show that during the initial years of the post reform period a reduction in efficiency is observed for banks in both countries however efficiency levels were found to have increased subsequently suggesting a period of initial adjustment throughout much of the 1990s followed by a subsequent correction in the latter part of the sample period

separating the likelihood and timing of bank failure abstract we use a split population survival time model to separate the determinants of bank failure from the factors influencing the survival time of failing banks basic indicators of a bank s condition such as capital troubled assets and net income are important in explaining the timing of bank failure however many of the other variables typically included in bank failure models such as measures of bank liquidity are not associated with the time to failure the results also suggest that the closure of large banks is not delayed relative to the closure of small banks