bond indenture provisions and the risk of corporate debt abstract this paper examines the effect of alternative bond indenture provisions on the allocation of risk among the firm s claimants the approach taken here differs from that of earlier studies in that risk allocation is examined while the firm s leverage in market value terms is held constant in this context four indenture provisions are examined 1 the time to maturity 2 the promised payment schedule 3 financing restrictions and 4 priority rules it is concluded that risk is transferred from stockholders to bondholders as the time to maturity and promised payment increase appropriately furthermore substitution of longer term debt for an equal amount of shorter term debt also increases the risk to bondholders while decreasing the risk to stockholders the analysis shows that a coupon bond can be represented by a unique discount bond with the same risk and value this permits the characterization of the effective maturity of a risky debt issue a concept analogous to the stochastic duration of a default free coupon bond these results are shown to be independent of the means used to finance the debt issue finally it is concluded that the relative risk associated with different bonds issued by the same firm cannot be determined by the structure of priority rules alone it is also necessary to consider the timing of the promised payments compared to that of the other debt issues in the firm s capital structure

long run estimates of technological change and scale economies in a dynamic framework australian permanent building societies 1974 1990 abstract this paper formulates and estimates a dynamic model to investigate the characteristics of the cost function of australian permanent building societies while the results suggest that the societies adjust costs quickly to long run levels the modelling of cost dynamics is shown to have a significant influence on estimates of scale economies and on the identification of the timing of shifts in the cost frontier and changes in the growth of total factor productivity

management buyouts evidence on taxes as a source of value this paper estimates the value of tax benefits in 76 management buyouts of public companies completed in the period 1980 to 1986 the median value of tax benefits estimated at the time the buyout company goes private has a lower bound of 21 and an upper bound of 143 of the premium paid to pre buyout shareholders the estimated value depends on the rate buyout debt is repaid and the tax rate applied to the interest deductions the paper also presents evidence on the actual taxes paid and debt repayment rates by these companies after the buyout the results in this paper suggest that tax benefits are an important source of the wealth gains in management buyouts

estimation of economies of scale in banking using a generalized functional form this paper addresses four issues that arise in the estimation of economies of scale in the commercial banking industry first a common assumption underlying many of the studies of economies of scale in banking is the assumption of a cobb douglas production function with exogenous input prices the use of a cobb douglas production function facilitates the estimation of the output elasticity of cost however there does not appear to be any other reason a priori for such an assumption this paper utilizes a box cox hereafter b c generalized functional form methodology to directly test the assumption of an underlying cobb douglas production function second if the assumption of a cobb douglas production function is inappropriate as a description of the production process of the financial firm estimates of the output elasticity may be biased the sensitivity of the estimates of this elasticity to the choice of functional form can also be examined through the use of a generalized functional form methodology third no general consensus has been reached regarding the appropriate definition of bank output thus a diversity of measures of bank output have been employed in previous estimates of economies of scale in banking the sensitivity of the estimated output elasticity of cost to the selection of several alternative measures of output is examined through the use of the generalized functional form methodology finally the b c estimates of the cost function for commercial banks can be used

scale and scope economies at large banks including off balance sheet products and regulatory effects 1984 1991 this paper examines the impact of the risk based capital rbc requirements on bank cost efficiencies we take into consideration both on and off balance sheet obs products and allow product mixes to differ across banks and to vary over time our empirical results suggest that the cost structures of large banks are significantly different during the pre rbc and post rbc periods that is the rbc change seemed to reduce the optimal bank size that achieves maximum scale and scope economies so that some of the large banks that previously were efficient became too large and inefficient the results suggest that regulations that encourage large banks to expand their production and product mixes any further will likely result in a less efficient banking industry

do mergers improve the x efficiency and scale efficiency of u s banks evidence from the 1980s a central issue currently debated among bank analysts and economists is whether mergers enhance the efficiency of surviving banks this paper investigates the postmerger performance of acquiring banks that participated in a merger during the period 1980 90 the evidence suggests that acquirers failed to improve x efficiency after the merger acquiring banks however experienced moderate gains in scale efficiency relative to a control sample the second part of the paper uses regression analysis to identify factors influencing the performance of merging banks the regression results suggest that improvements in postmerger performance depend on the ability of the bank to strengthen asset quality the author finds no evidence to support the theory that in market mergers lead to significant improvements in efficiency copyright 1997 by ohio state university press

the composite cost function and efficiency in giant japanese banks abstract this study provides further empirical investigation in the context of giant japanese banks of the recent claim by pulley and braunstein 1992 a composite cost function for multiproduct firms with an application to economies of scope in banking review of economics and statistics 74 221 230 that their new composite model for the multiproduct cost function has important advantages over the separable quadratic generalized translog and standard translog models in addition to assessing the composite model s relative ability in measuring global scope and scale economies the study also extends the p b analysis to assess measurement of product specific scope and scale economies pairwise cost complementarities between outputs changes in the marginal costs of outputs and technological change the results appear to confirm p b s chain the persistent finding of scale economies for large japanese banks is also investigated and confirmed

market motives distinctive capabilities and domestic inertia a hybrid model of innovation generation the authors develop and test a model of innovation in which the generative process of innovation is fostered by a balance of three forces market motives distinctive capabilities and domestic ine

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

productivity growth technical progress and efficiency in their comment subhash c ray and evangelia desli 1997 hereafter rd point out that the specification of the decomposition of the malmquist productivity index used by fare et al 1994 hereafter fgnz is not unique and propose and compute an alternative specification of that decomposition we will discuss additional decompositions at the end of this note but proceed here by comparing the rd decomposition with fgnz based on both conceptual and computational grounds rd provide a discussion of the overall malmquist productivity index including the important issue of when this index is equivalent to the traditional notion of total factor productivity tfp namely under the condition that the reference technology be consistent with constant returns to scale crs as they point out this will yield a measure of tfp even if the true underlying technology is not crs for example both rd and fgnz use the crs reference technology to compute overall malmquist productivity one of the key issues raised is the role of the underlying scale properties of the benchmark technologies used to define and compute both productivity and its components in particular two reference technologies are employed in both rd and fgnz what we refer to as crs and variable returns to scale vrs technologies by construction these technologies are nested the crs technology contains the vrs technology as in figure 1 in rd this nestedness provides the logical basis for our decomposition at a very intuitive level we would argue that these two benchmarks can be used to provide bounds on the underlying true but unknown technology 2 intuitively we see the vrs technology providing a type of convex inner approximation whereas the crs technology provides a type of convex outer approximation thus these two technologies provide alternative benchmarks they do not require that the data satisfy either crs or vrs another possible intuitive interpretation is that the crs captures a perhaps hypothetical long run and the vrs approximates the short run as a reference technology the crs technology has some very useful features for example it captures the notion of maximal

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

the sources of productivity change in spanish banking abstract in this paper we examine the pattern of productivity change in spanish banking over the period 1986 1993 two sectors dominate spanish banking commercial banks and the faster growing savings banks we begin by examining productivity change separately within each sector however since the two sectors are gradually becoming more competitive we continue by merging the two sectors and by examining productivity change in the industry the merging procedure follows a methodology originally proposed by charnes cooper and rhodes 1981 in which intra sectoral managerial inefficiency is eliminated prior to merging this procedure allows us to distinguish differences in managerial efficiency within each sector from differences in the institutional efficiency of the two sectors it also enables us to decompose potential productivity change into institutional efficiency change technical change and the impact of scale economies we find the commercial banks to have had a slightly lower rate of productivity growth but a slightly higher rate of potential productivity growth we attribute this phenomenon to differences in both managerial efficiency and institutional efficiency to differences in the rate of technical progress and to the adverse impact of diseconomies of scale in the commercial banking sector

the dominance of inefficiencies over scale and product mix economies in banking abstract this study measures and analyzes inefficiencies for all u s banks in 1984 inefficiencies are measured relative to a thick frontier cost function and are found to dominate measured scale and product mix economies most inefficiencies are operational in nature involving the overuse of physical inputs rather than financial involving overpayment of interest also technical inefficiencies proportionate overuse of all inputs dominate allocative inefficiencies improper mix of inputs these results suggest that competitive pressures in banking from deregulation will be focused primarily on banks that do not control costs rather than on those of a particular size or product mix

scale and scope economies in the multi product banking firm abstract the multi product nature of the banking firm is examined utilizing the translog cost function this analysis indicates that contrary to conventional wisdom natural monopoly scale economies and product specific decreasing costs are not robust characterizations of the banking industry there is however evidence that the cost function is characterized by economies of scope the implications of these results are discussed and extensions of this approach suggested

a study of bank efficiency taking into account risk preferences abstract i use the stochastic cost frontier approach to investigate efficiency of banks operating in the third federal reserve district accounting for the quality and riskiness of bank output in addition to the mean and mode of the conditional distribution of the one sided error term i calculate confidence intervals for the inefficiency measures based on the conditional distribution the results indicate that third district banks are operating at cost efficient output levels and product mixes but are not efficiently using their inputs the second part of the article relates the inefficiency measures to several correlates

private equity and regulatory capital regulatory capital requirements for european banks have been put forward in the basel ii capital framework and subsequently in the capital requirements directive crd of the eu we provide a detailed discussion of the capital requirements for private equity investments under different approaches for the internal model approach we present a structural model that we calibrate to a proprietary dataset we modify the standard merton structural model to make it applicable in practice and to capture stylized facts of private equity investments we also implement the early default feature with a fast simulation algorithm our results support capital requirements lower than in basel ii but not as low as in crd thereby giving adverse incentives to banks for using advanced risk models a sensitivity analysis shows that this finding is robust to parameter uncertainty and stress scenarios

scale economies and cost complementarities in commercial banks on and off balance sheet activities abstract bank off balance sheet obs activities have grown dramatically and have become significantly important especially at large banks we investigate whether failure to incorporate obs products may lead to a misspecification problem models that exclude deposits from the output specification suggest economies of scale which vanish when deposits are included we find that inclusion of obs products has little effect on the scale economies measures with only a few exceptions the results provide no evidence of cost complementarities in joint production the tremendous growth of bank obs activities in the 1980s may be explained by the very small approximately zero pecuniary cost of these activities

productivity growth in large us commercial banks the initial post deregulation experience abstract we explore productivity growth for a group of 201 large us commercial banks over the initial post deregulation period from 1984 to 1990 using data envelopment analysis dea we measure productivity growth using malmquist productivity indexes and isolate the contributions of technical change technical efficiency change and scale change to productivity growth we find overall productivity growth at the rate of about 4 5 per year on average but productivity declined by 7 61 between 1984 and 1985 and by 0 33 between 1988 and 1989 our second stage panel regressions reveal that larger asset size and specialization of product mix associate with higher productivity growth while higher equity to assets associates with lower productivity growth

productivity and efficiency change and shareholder value evidence from the spanish banking sector productivity change and shareholder value have been analysed in the banking sector in the last few years although it should be noted that these two important aspects have been studied separately in this regard the main contribution of our study is to link these two lines of research by verifying whether those banks characterized by higher levels of efficiency and productivity change have a higher shareholder value to measure changes in efficiency and productivity we use the malmquist nonparametric technique which is calculated from data envelopment analysis dea linear programming approach the malmquist total factor productivity index enables separation of the catching up effect i e changes over time in technical efficiency from technological change i e the shift of best practice frontier over time due to technological progress our results for a sample of listed spanish banks in the period 2000 to 2004 confirm that those banks with higher efficiency and productivity changes have a higher

bank discrimination holding bank ownership and economic consequences evidence from china abstract this paper finds that compared with chinese state owned firms non state owned firms have a greater propensity to hold significant ownership in commercial banks these results are consistent with the notion that because non state owned firms are more likely to suffer bank discrimination for political reasons they tend to address their financing disadvantages by building economic bonds with banks we also find that among non state owned firms those that hold significant bank ownership have lower interest expenses and are less likely to increase cash holdings but more likely to obtain short term loans when the government monetary policy is tight these results suggest that the firms building economic bonds with banks can enjoy benefits such as lower financial expenses and better lending terms during difficult times finally we find that non state owned firms with significant bank ownership have better operating performance overall we find that firms can reduce discrimination through holding bank ownership

technological change in large u s commercial banks this article examines technological change its relationship to firm size and its impact on the efficient scale of output and product mix for large u s commercial banks the results suggest that technological change lowered real costs by about one percent per year increased the cost minimizing scale of outputs and affected product mix the authors do not find support for the galbraith schumpeter hypothesis this suggests that the largest banks cannot use innovation alone to outpace smaller banks the major implications are that public policies allowing freer banking combinations do not necessarily run counter to the public interest copyright 1991 by university of chicago press

product line deregulation and the cost structure of us savings and loan associations recent legislative actions restrict thrift powers which were broadened by deregulatory actions in the early 1980s using nationwide data for savings and loans s ls evidence is found that these restrictions may rise intermediation costs for s ls by limiting their ability to exploit economies of scope between mortgage related and other outputs in addition economies of scale for a wide size range of s ls are found evidence is also found to suggest that insolvent s ls have higher costs for the same level of outputs than solvent s ls

competition and innovation evidence from financial services abstract this paper presents new evidence on the relationship between competition and innovation by extending previous literature from manufacturing to financial services we introduce a new measure of overall innovation by estimating and enveloping annual minimum cost frontiers to create a global frontier the distance to the global frontier constitutes each bank s technology gap which decreases if the bank manages to innovate our innovation measure enables us to derive and estimate the model of aghion et al 2005b at the firm level for the us banking industry based on individual bank call report data for the period 1984 2004 consistent with theoretical and empirical work by aghion et al we find evidence of an inverted u relationship between competition and innovation that is robust over several different specifications further evidence on major structural changes in the us banking industry indicates that banks moved beyond their optimal innovation level and that interstate banking deregulation resulted in lower bank innovation policy implications to financial reform and prudential regulation are discussed also

malmquist indices of productivity growth during the deregulation of norwegian banking 1980 89 productivity growth during the deregulation of the norwegian banking industry is studied within the framework of data envelopment analysis which explicitly allows for multiple outputs introducing malmquist indices for productivity growth total growth can be decomposed into frontier growth and change in each bank s distance to the frontier both the total growth index and its components can be consistently chained over time we find productivity regress at the average bank prior to the deregulation but rapid growth when deregulation took place deregulation also led to less dispersion of productivity levels within the industry

the evolution of buyout pricing and financial structure in the 1980s we examine changes in the pricing and financial structure of large management buyouts in the 1980s over time 1 buyout price to cash flow ratios rose in absolute terms particularly in deals financed using public junk bonds 2 required bank principal repayments accelerated leading to sharply lower ratios of cash flow to total debt obligations 3 private subordinated and bank debt were replaced by public junk debt and 4 management teams and dealmakers took more money out of transactions up front these patterns are consistent with an overheating phenomenon in the buyout market preliminary post buyout evidence lends some support to this interpretation

the luenberger indicator and productivity growth a note on the european savings banks sector we employ the luenberger productivity indicator to estimate productivity growth and its decomposition into technical change and efficiency change components for savings banks sectors in 10 eu countries between 1996 and 2003 the luenberger indicator requires less restrictive assumptions than standard nonparametric productivity indexes and it allows the assumption of profit maximization to be made for sample firms we estimate average productivity growth in the savings banks sector to be 2 78 per annum and driven almost entirely by technical change whilst the general results confirm earlier findings this study is one of the earliest to identify cross border differences in productivity growth in the savings banks sector

output allocative and technical efficiency of banks abstract in this paper we calculate output allocative and technical efficiency for a sample of small banks operating in 1982 we do so by estimating a shephard type output distance function as a deterministic frontier in general we find that the banks in our sample are output inefficient

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

a dynamic analysis of the adoption of a new technology the case of optical scanners two p roportional hazard models are used to investigate the differingeffects of marke t structure variables on the conditional probabilityof a firm initially adoptin g the new technology of optical scanners as the innovation spreads through the f ood store industry during the early stage leading firms with large average sto re size which are not members of chains and which operate in less concentrated m arkets with higher incomes and wage rates tend to adopt scanners sooner later on differences in seller concentration market share and size become less impo rtant as other firms follow prior adoptions copyright 1987 by mit press

a multiproduct cost study of savings and loans this paper investigates the cost structure of savings and loans most studies of financial institutions have failed to take into account the multiproduct nature of these institutions using the multiproduct approach the existence of subadditivity multiproduct global and product specific economies of scale and scope and substitutability between inputs is investigated a translogarithmic cost function is estimated using 1982 data on california savings and loans restrictive functional forms also estimated are rejected standard errors for the statistics calculated are estimated and various statistical tests are conducted previous authors have not calculated standard errors for these statistics no evidence of subadditivity in the industry is found in order to investigate the impact of deregulation on the financial services industry it is necessary to know the cost structure of the industry optimal firm size and product mix can be determined once the structure is known the presence of scale economies would imply that smaller firms or entering firms that operate at a small scale would be at a cost disadvantage compared with larger established firms a finding of economies of scope i e economies of joint production would imply that firms that were specialized would be at a cost disadvantage and that regulations that restrict the outputs a firm is allowed to produce may lead to inefficient production

the impact of liberalization on the productive efficiency of indian commercial banks abstract we examine the productive efficiency of 70 indian commercial banks during the early stages 1986 1991 of the ongoing period of liberalization we use data envelopment analysis to calculate radial technical efficiency scores we then use stochastic frontier analysis to attribute variation in the calculated efficiency scores to three sources a temporal component an ownership component and a random noise component we find publicly owned indian banks to have been the most efficient followed by foreign owned banks and privately owned indian banks we also find a temporal improvement in the performance of foreign owned banks virtually no trend in the performance of privately owned indian banks and a temporal decline in the performance of publicly owned indian banks we attempt to explain these patterns in terms of the government s evolving regulatory policies

does bank efficiency matter market value relevance of bank efficiency in australia the stochastic frontier analysis is employed to investigate efficiency of publicly listed australian banks over the period 1985 to 2008 the results suggest that technical cost and profit efficiency of australian banks have improved over time large banks have attained a higher level of cost efficiency but a lower level of technical efficiency compared to small banks no substantial difference between the two groups is found in terms of profit efficiency a panel regression of bank stock return on bank efficiency suggests that an improvement in technical cost or profit efficiency contributes to the market value of a bank thus the shareholder wealth maximization goal is aligned with the goal of maximizing bank efficiency in the australian context

the impact of the degrees of operating and financial leverage on systematic risk of common stock the capital asset pricing model postulates that the equilibrium return on any risky security is equal to the sum of the risk free rate of return and a risk premium measured by the product of the market price of risk and the security s systematic risk in the capital asset pricing model beta as an index of systematic risk is the only security specific parameter that affects the equilibrium return on a risky security

productivity technical and efficiency change in singapore s services sector 2005 to 2008 the current study was motivated by statements made by the economic strategies committee that singapore s recent productivity levels in services were well below countries such as the us japan and hong kong massive employment of foreign workers was cited as the reason for poor productivity levels to shed more light on singapore s falling productivity a nonparametric malmquist productivity index was employed which provides measures of productivity change technical change and efficiency change the findings reveal that growth in total factor productivity tfp was attributed to technical change with no improvement in efficiency change such results suggest that gains from tfp were input driven rather than from a best practice approach such as improvements in operations or better resource allocation

technical scale and allocative efficiencies in u s banking an empirical investigation a nonparametric frontier approach is used to calculate the overall technical pure technical allocative and scale efficiencies for a sample of 322 independent banks the sample was drawn from the federal deposit insurance corporation tapes on the reports of condition and reports of income call reports for the year 1986 the results indicated a low level of overall efficiency the main source of inefficiency was technical in nature rather than allocative separate efficiency frontiers were constructed to test the effect of branching however the distributions of efficiency measures for branching and non branching banks were not found to be different

state passage of interstate banking legislation an analysis of firm legislative and economic characteristics abstract forty nine states and the district of columbia enacted legislation reducing interstate banking restrictions between july 1982 and april 1993 for these 50 banking bills deregulation increased the average price of bank stocks returns vary cross sectionally by firm characteristics regulatory features and economic conditions returns are positively related to the characteristics of acquisition targets furthermore returns are positively related to legislative features that increase the bargaining power of potential targets and economic conditions that are likely to encourage bank acquisition these findings are consistent with the relaxation of geographic restrictions increasing activity in the corporate control market

short run cost inefficiency of commercial banks a flexible stochastic frontier approach we adopt the intermediation approach and use a flexible stochastic frontier to examine the cost efficiency of united states commercial banks with total assets in excess of million we find an average overall inefficiency of just under 10 percent a level somewhat lower than found in previous work our analysis of intra industry variation concludes that inefficiency generally rises with bank size further banks that have branching networks either domestic or foreign have higher inefficiency on average but at the same time inefficiency falls as the number of offices in the branch network expands state level data on the ease of serviceing the market competition from savings institutions and the financial sophistication of depositors significantly affect bank inefficiency generally with the expected signs finally our findings suggest that regulatory changes that increase capital requirements may lead to increased bank efficiency in the short run copyright 1994 by ohio state university press

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

efficiency in the savings and loan industry abstract the stochastic econometric cost frontier approach is modified to investigate efficiency in mutual and stock s ls using 1991 data on u s s ls this methodology allows both the cost frontier and error structures to differ between s ls of these two ownership forms a likelihood ratio test indicates that the data support this unrestricted model which implies efficient mutual and stock s ls use different production technologies various measures of inefficiency show that on average stock s ls are less efficient than mutual s ls the second part of the article relates the inefficiency measures to several correlates

evaluating the cost efficiency of the italian banking system what can be learned from the joint application of parametric and non parametric techniques abstract research on bank efficiency has developed in two separate streams econometric studies and data envelopment analysis a linear programming technique these two branches of literature have developed quickly but separately in this paper these two approaches have been tested on a common panel of 270 italian banks and this has suggested the following i econometric and linear programming results do not differ dramatically when based on the same data and conceptual framework ii when differences arise they can be explained by going back to the intrinsic features of the models moreover some findings on italian banks may be of interest also to the international reader i efficiency scores show a high variance ii the banking system is split in two between northern and southern banks iii there is a direct rather than inverse relationship between productive efficiency and asset quality iv the efficiency of italian banks did not increase over the period 1988 1992

dea ar profit ratios and sensitivity of 100 large u s banks abstract several important dea ar concepts were applied here to banking for the first time this application includes classification sensitivity uniqueness linked cones lcs and profit ratios notably large bank behavior seems to be explained better by profit ratios than by relative efficiency measures of dea efficiency ar efficiency and lc profit ratios were made for a bank panel of the u s s 100 largest banks in asset size from 1986 to 1991 high levels of inefficiency were found as in previous studies classification of the dea efficiency measures identified the inefficient dmus with some positive primal slacks sensitivity analysis of the dea efficiency measures showed that the extreme efficient classification was generally relatively insensitive to errors in the data the ars eliminated i 44 to 60 of the dea extreme efficient dmus and ii all of the banks with unprofitable actual profit ratios some statistical analyses highlight the superiority of the lc profit ratios relative to the ar efficiency measures

international comparison of bank production characteristics and technological change in this paper we conduct an international comparison of bank production and technological characteristics the comparison is performed using novel evidence on changes in labour demand over the period 1980 89 for banks headquartered in canada france west germany italy japan and the united states the results suggest that there is relatively low substitutability of labour for capital in the production process of these banking organizations significant scale economies were found with regards to the expansion of output and the concomitant increase in labour in addition technological change operated to lower the quantity of inputs needed to produce a given level of outputs and increased the minimum efficient size bank over the sample period many of the production characteristics and technology effects varied significantly across countries these findings imply that intercountry differences in production characteristics and technological change should be explicitly recognized in bank strategic planning

venture capital funds flow performance relationship and performance persistence this paper finds that venture capital funds that are expected to be backed by more skilled investors show no performance persistence but a significant flow performance relationship in contrast funds that are expected to be backed by less skilled investors show performance predictability and have a non significant flow performance relationship these results suggest that only skilled investors use all available information to adjust their capital allocation and as a result eliminate performance predictability as argued theoretically by berk and green 2004 results also show that kaplan and schoar 2005 overstate the persistence in fund performance by not using an ex ante measure of the performance of earlier funds whether or not an ex ante measure is used however the persistence is largely due to unsophisticated investors when investors are sophisticated the performance of earlier funds sequence and fund size do not help predict the performance of the focal fund

technical progress inefficiency and productivity change in u s banking 1984 1993 studies often find that on average u s commercial banks are quite inefficient and the authors find that banks became more technically inefficient between 1984 and 1993 from a new decomposition of the malmquist productivity index into changes in pure technical and scale efficiency as well as both pure technical changes and changes in scale of technology they find that much of the inefficiency increase can be attributed to the general failure of banks to adopt technological improvements made by a few banks that advanced the efficient frontier small banks experienced especially large decreases in both efficiency and productivity

efficiency and technical progress in banking empirical results for a panel of german cooperative banks abstract using 1989 1992 individual data of 757 german cooperative banks and applying the intermediation approach we specify a multi product translog cost function for this part of the german banking industry for all size classes moderate economies of scale can be identified there is also evidence of economies of scope which supports the notion of universal banking as for cost efficiency we find that the average banks in all size classes deviate considerably from the best practice cost frontier all banks enjoy growth of total factor productivity which is higher for the smaller banks in the sample

the effect of leverage on the cost of capital of us buyouts abstract this paper addresses the problem to assess the effect of leverage on the cost of capital for buyout performance analyses it draws on a unique and proprietary set of data on 133 us buyouts between 1984 and 2004 for each of them we determine a public market equivalent that matches it with respect to its timing and its systematic risk we show that under realistic mimicking conditions the average cost of capital is below the commonly used benchmark s p 500 thereby we control for two important aspects for the risks taken by lenders in the buyout transactions which affects the sponsors risks and for the corresponding cost of debt which lowers the return of the public market equivalent only with borrowing and lending at the risk free rate is the average cost of capital close to the average index return this finding is particularly important as existing literature on that topic tends to rely on benchmarks without a proper risk adjustment

return on roller coasters a model to guide investments in theme park attractions despite the economic significance of the theme park industry and the huge investments needed to set up new attractions no marketing models exist to guide these investment decisions this study addresses this gap in the literature by estimating a response model for theme park attendance the model not only determines the contribution of each attraction to attendance but also how this contribution is distributed within and across years the model accommodates saturation effects which imply that the impact of a new attraction is smaller if similar attractions are already present it also captures reinforcement effects meaning that a new attraction may reinforce the drawing power of similar extant attractions especially when these were introduced recently the model is calibrated on 25 years of weekly attendance data from the efteling a leading european theme park our return on investment calculations show that it is more profitable to invest in multiple smaller attractions than in one big one this finding is in remarkable contrast with the current arms race in the industry furthermore even though thrill rides tend to be more effective than theme rides there are conditions under which one should consider to switch to the latter

a nonparametric approach for assessing productivity dynamics of large u s banks the 1980s marked an era of substantial change for the us commercial banking industry an issue of considerable interest to banking analysts and economists alike is whether the intensified competitive pressure generated by deregulation and notable financial innovations enhanced productivity to investigate the response to these changes the non parametric malmquist index is used to evaluate productivity dynamics a statistically significant productivity surge found between 1983 and 1984 is followed by productivity regress the next period post 1985 sustained productivity progress is observed for the remainder of the decade productivity movements are primarily attributable to technological changes rather than scale changes or convergence to the production frontier

deregulation and productivity decline the case of spanish savings banks abstract during the 1980s many regulatory constraints limiting competition in spanish banking were relaxed or removed although deregulation came later to savings banks than to the rest of the banking sector two consequences of partial deregulation of savings banks have been a rapid growth in branching activity much of it geographically dispersed and a burst of merger activity in this paper we investigate productive efficiency and total factor productivity change in spanish savings banks over the 1986 1991 post deregulation period neither branching nor mergers provide an adequate explanation for the magnitude or the nature of the productivity decline we observe over the period

a diffusion theory model of adoption and substitution for successive generations of high technology products this study deals with the dynamic sales behavior of successive generations of high technology products new technologies diffuse through a population of potential buyers over time therefore diffusion theory models are related to this demand growth furthermore successive generations of a technology compete with earlier ones and that behavior is the subject of models of technological substitution building upon the bass bass f m 1969 a new product growth model for consumer durables management sci 15january 215 227 diffusion model we develop a model which encompasses both diffusion and substitution we demonstrate the forecasting properties of the model by estimating parameters over part of the data and projecting shipments for later periods

deregulation technological change and the business lending performance of large and small banks according to deyoung et al journal of financial services research 2004 deregulation and technological change has divided the us banking industryinto two primarysize based groups verylarge banks specializing in the use of hard information to make standardized loans and smaller banks specializing in the use of soft information and relationship development to make non standardized loans we evaluate business lending performance for small and large banks over the 1993 2001 period small business lending bysmall banks is characterized byrelationship development and non standardized loans consistent with deyoung et al s model we find that after controlling for market concentration cost of funds and a variety of other factors that might influence yields smaller banks perform better than larger banks in the small business lending market however larger banks appear to have the advantage in credit card lending a market characterized byimpersonal relationships and standardized loans interestingly we find evidence that larger banks have been making inroads in the market for the smallest business loans a result consistent with the use of credit scoring bylarge banks to make

productivity growth technical progress and efficiency change in industrialized countries this paper analyzes productivity growth in 17 oecd countries over the period 1979 1988 a nonparametric programming method activity analysis is used to compute malmquist productivity indexes these are decomposed into two component measures namely technical change and efficiency change we find that u s productivity growth is slightly higher than average all of which is due to technical change japan s productivity growth is the highest in the sample with almost half due to efficiency change jel c43 d24 in this paper we apply recently developed

isolating the determinants of innovativeness a split population tobit spot duration model of timing and volume of first and repeat purchase the authors present the split population tobit spot duration model to incorporate two conceptually distinct dimensions of innovativeness in a single framework namely the timing and volume of adoption rather than utilizing a diffusion model specification based on word of mouth and social contagion effects the present approach uses a growth model specification and delineates a general function of time to describe the distribution of adoption timing estimation and several validation exercises performed on a data set describing the diffusion of personal computers across a sample of over 3000 u s firms provide strong support for the superiority of the spot model over models derived from restricted conceptualizations of innovativeness the empirical work albeit modest tests the impact of covariates such as firm size and decision centralization on the dimensions of innovativeness and sheds light on some inconsistent findings in the innovation adoption literature the authors subsequently derive the e

efficiency in the commercial banking industry a production frontier approach 1990 efficiency in the commercial banking industry a production frontier approach applied economics vol 22 no 4 pp 539 551

measuring cost efficiency in the property liability insurance industry abstract escalating prices and periodic availability problems in property liability insurance markets are often attributed to insurance company inefficiency and lax claims settlement practices this paper investigates these issues by estimating stochastic cost frontiers for three size stratified samples of property liability insurers over the period 1980 1988 a translog cost function and input share equations are estimated using maximum likelihood techniques the results show that large insurers operate in a narrow range around an average efficiency level of about 90 percent relative to their cost frontier efficiency levels for medium and small insurers are about 80 and 88 percent in relation to their respective frontiers wider variations in efficiency are present for these two groups in comparison with large insurers large insurers slightly over produce loss settlement services while small and medium size insurers under produce this output the small and intermediate size groups are characterized by economies of scale suggesting the potential for cost reductions from consolidations in the industry

on the sources of heterogeneity in banking efficiency literature one learns two main lessons from studying the great quantity of banking efficiency literature these lessons regard the heterogeneity in results and the absence of a comprehensive review aimed at understanding the reasons for this variability surprisingly although this issue is well known it has not been systematically analyzed before in order to fill this gap we perform a meta regression analysis mra by examining 1 661 efficiency scores retrieved from 120 papers published over the period 2000 2014 the meta regression is estimated by using the random effects multilevel model reml because it controls for within study and between study heterogeneity the analysis yields four main results firstly parametric methods yield lower levels of banking efficiency than nonparametric studies this holds true even after controlling for the approach used in selecting the inputs and outputs of the frontier secondly we show that banking efficiency is highest when using the value added approach followed by estimates from studies based on the intermediation method whereas those based on the hybrid approach are the lowest thirdly efficiency scores also depend on the quality of studies and on the number of observations and variables used in the primary papers as far as the effects of sample size dimension and quality of papers are concerned there are significant differences in sign and magnitude between parametric and nonparametric studies finally cost efficiency is found to be higher than profit and production efficiency interestingly mra results are robust to the potential outliers in efficiency and sample size distributions