institutional development and bank stability evidence from transition countries g21 p30 p34 p52 abstract this paper takes advantage of the dynamic nature of institutional reforms in transition economies and explores the causal effects of those reforms on bank risk using a difference in difference approach we show that banks financial stability increases substantially after these countries reform their legal insti tutions liberalize banking and restructure corporate governance we also find that the effects of legal and governance reforms on bank risk may critically depend on the progress of banking reforms a further examination of alternative risk measures reveals that the increases in financial stability among banks mainly come from the reduction of asset risk banks tend to have lower roa volatility and fewer nonper forming loans after reforming the institutional environment finally we split our sample into foreign and domestic banks and find that the enhancement of financial stability is more pronounced for domestic banks

a comparative study of efficiency in european banking this paper investigates whether there has been an improvement in and convergence of productive efficiency across european banking markets since the creation of the single internal market using efficiency measures derived from dea estimation the determinants of european bank efficiency are evaluated using the tobit regression model approach the established literature on modelling the determinants of bank efficiency is then extended by recognizing the problem of the inherent dependency of dea efficiency scores when used in regression analysis to overcome the dependency problem a bootstrapping technique is applied overall the results suggest that since the eu s single market programme there has been a small improvement in bank efficiency levels although there is little evidence to suggest that these have converged the results also suggest that inference on the determinants of bank efficiency drawn from non bootstrapped regression analysis may be biased and misleading

foreign bank entry deregulation and bank efficiency lessons from the australian experience abstract this study considers the impact of foreign bank entry on banking efficiency in australia during the post deregulation period 1988 2001 using data envelopment analysis malmquist indices and stochastic frontier analysis we find foreign banks more efficient than domestic banks which however did not result in superior profits major australian banks have used size as a barrier to entry to new entrants furthermore bank efficiency has increased post deregulation and the competition resulting from diversity in bank types was important to prompt efficiency improvements finally the recession of the early 1990s resulted in a distinct shift in the process of efficiency changes

banking competition risk and regulation in a dynamic framework commercial banks compete for customers by setting acceptance criteria for granting loans while taking into account regulatory requirements by easing its acceptance criteria a bank faces a trade off between attracting more demand for loans thus making higher per period profits and deterioration in the quality of its loan portfolio thus tolerating a higher risk of failure our main results state that more stringent capital adequacy requirements lead banks to set stricter acceptance criteria and that increased competition in the banking industry leads to riskier bank behaviour it is shown that risk adjusted regulation is effective in an extension of our basic model we show that it may be beneficial for a bank to hold more equity than prescribed by the regulator even though issuing equity is more expensive than attracting deposits

determinants of banks nerlovian economic efficiency a dea bootstrap approach this study aims to evaluate the nerlovian economic efficiency of taiwanese commercial banks and its determinants by assuming the presence of an imperfectly competitive market using a two stage esti

the dynamics of company profits an international comparison 1 profits and the process of competition dennis c mueller 2 modelling persistent profitability paul a geroski 3 the persistence of profits in the united states dennis c mueller 4 the persistence of profits in us manufacturing industries ioannis kessides 5 the persistence of profitability in canada r shyam khemani and d m shapiro 6 persistence of corporate profits in the federal republic of germany joachim schwalbach and talat mahmood 7 the persistence of profits in france frederic jenny and andre paul weber 8 the persistence of profits in japan hiroyuki odagiri and hideki yamawaki 9 the persistence of profits in the uk john cubbin and paul a geroski 10 the persistence of profits international comparison hiroyuki odagiri and hideki yamawaki 11 the persistence of profits in perspective paul a geroski and dennis c mueller

ceo compensation and bank efficiency an application of conditional nonparametric frontiers the paper investigates in a dynamic context the effect of chief executive officer ceo bonus and salary payments on banks technical efficiency levels our methodological framework incorporates the latest developments on the probabilistic approach of efficiency measurement as introduced by b din et al 2012 we apply time dependent conditional efficiency estimates to analyse a sample of 37 us banks for the period from 2003 to 2012 the empirical evidence reveals a non linear relationship between ceo bonus and salary payments and banks efficiency levels more specifically it is reported that salary and bonus payments affect differently banks technological change and technological catch up levels finally the empirical evidence suggests that higher salary and bonus payments are not always aligned with higher technical efficiency levels

evaluating income streams a decision analysis approach most important decision problems virtually all capital investiments and planning situations involve risky cash flows with uncertainties that are resolved over time in most of these problems the decision maker has access to financial markets and may borrow and lend to smooth consumption over time yet because of the difficulty of incorporating these borrowing and lending decisions into the evaluation models these opportunities are rarely explicitly modeled in decision and risk analyses of these investments in this paper we study the errors induced by failing to account for these borrowing and lending decisions and we develop extensions to the standard decision and risk analysis procedures that given certain market and preference assumptions take these borrowing and lending opportunities into account without overburdening the evaluation models

the contribution of product mix versus efficiency and technical change in us banking abstract similar to a du pont analysis this paper divides the changes in returns on assets of us commercial banks for the period from 2000 to 2005 into conventional measures of bank performance the contribution of product mix is significant and offsets losses from technical change and operating efficiency banks respond to changes in the business environment by switching towards more lucrative traditional and nontraditional products large banks are found to benefit more than community banks from the switch to an optimal output portfolio mix including new products spawned by recent financial innovations and deregulation

measurement of human capital input across countries a method based on the laborer s income abstract i propose the aggregate output divided by the wage rate of an industrial laborer in a country as a measure of the aggregate human capital input for that country i use this method to compare the human capital inputs for 45 countries of diverse output levels i find that human capital input differs between the lowest income and the highest income countries by a factor of 2 2 or 2 8 depending on the inclusion of outlier countries this is significant but small relative to the results from the method based on years of schooling

the new keynesian phillips curve and lagged inflation a case of spurious correlation the new keynesian phillips curve nkpc specifies a relationship between inflation and a forcing variable and the current period s expectation of future inflation most empirical estimates of the nkpc typically based on generalized method of moments gmm estimation have found a significant role for lagged inflation producing a hybrid nkpc using u s quarterly data this article examines whether the role of lagged inflation in the nkpc might be due to the spurious outcome of specification biases like previous investigators we employ gmm estimation and like those investigators we find a significant effect for lagged inflation we also use time varying coefficient tvc estimation a procedure that produces consistency under a variety of sources of misspecification using two separate measures of expected inflation we find strong support for the view that under tvc estimation the coefficient on expected inflation is near unity and that the role of lagged inflation in the nkpc is spurious

environmental regulations and productivity growth the case of fossil fueled electric power generation this paper measures and analyzes the effect of sulfur dioxide emission restrictions on the rate of productivity growth in the electric power industry over the 1973 79 business cycle a firm specific measure of regulatory intensity is developed which depends on the severity of the emission standard the extent of enforcement and the unconstrained emission rate relevant to each utility the results indicate that emission regulations result in significantly higher generating costs primarily from the increased use of low sulfur fuels the average rate of productivity growth was reduced by 0 59 percentage points per year for constrained utilities

on the determinants of local government performance a two stage nonparametric approach abstract this article analyzes the efficiency of local governments in the comunitat valenciana spain and their main explanatory variables the analysis is performed in two stages firstly efficiency is measured via nonparametric activity analysis techniques specifically we consider both data envelopment analysis dea and free disposable hull fdh techniques the second stage identifies some critical determinants of efficiency focusing on both political and fiscal policy variables in contrast to previous two stage research studies our approach performs the latter attempt via nonparametric smoothing techniques rather than econometric methods such as ols or tobit related techniques results show that efficiency scores especially under the nonconvexity assumption fdh are higher for large municipalities thus there is empirical evidence to suggest that resources may be better allocated by large municipalities however the inefficiency found is not entirely attributable to poor management as second stage analysis reveals both fiscal and political variables to be explicably related to municipality performance moreover the explanatory variables impact on efficiency is robust to the chosen technique either convex dea or nonconvex fdh

deregulation market power and risk behaviour in spanish banks abstract this paper provides empirical evidence on the effects of regulatory changes in the market power of spanish banks it also analyses the response of banks in terms of risk taking behaviour as a result of a reduction in economic profits we find that liberalisation measures have increased competition and eroded banks market power we observe that banks with lower charter values tend to have lower equity assets ratios lower solvency and to experience higher credit risk the last evidence is new in the literature and calls for strengthening regulatory concerns about credit risk management by banks in situations of increased competition

competition in banking and the lending channel evidence from bank level data in asia and latin america abstract this paper examines how banking competition affects the transmission of monetary policy through the bank lending channel we apply a two step estimation procedure using bank level panel data for commercial banks in 10 asian and 10 latin american countries during the period from 1996 to 2006 in the first step we measure the degree of banking competition by applying the methodology proposed by panzar and rosse 1987 in the second step we estimate a loan growth equation where the explanatory variables include the panzar rosse measure of banking competition the estimation results provide consistent evidence that increased competition in the banking sector weakens the transmission of monetary policy through the bank lending channel this is especially true for banks in latin american countries and banks of small size low liquidity and low capitalization we also discuss the policy implications of the main findings of this paper

optimal monetary policy in the euro area in the presence of heterogeneity abstract this paper examines the optimal design of monetary policy in the european monetary union in the presence of structural asymmetries across union member countries it derives analytically an optimal interest rate rule under commitment and studies the dependence of its coefficients on the parameters of the structural model of each economy the central bank s preferences for inflation and output stabilization as shown in its loss function and the relative size of each country based on a two country forward looking general equilibrium model which is estimated for two euro area countries germany and france we show that there are gains to be achieved by the ecb taking into account the heterogeneity of economic structures this finding appears to be robust under alternative weights given by the central bank to the stabilization of the target variables although the implementation of the proposed rule involves difficulties relating to data and estimation constraints as well as risks of accommodating structural divergences it is important that the ecb takes into consideration national characteristics in formulating its monetary policy especially in view of more countries joining the european monetary union in the future however as monetary and financial integration advances the welfare benefits of monetary policy responding to individual countries variables may become less significant

the impact of regulatory reforms on cost structure ownership and competition in indian banking this paper evaluates the impact of financial sector reforms on the cost structure characteristics and on the ownership cost efficiency relationship in indian banking it also examines the impact of reforms on the dynamics of competition in the lending market we find evidence that deregulation improves banks performance and fosters competition in the lending market results suggest technological progress once indian commercial banks have adjusted to the new regulatory environment this however does not translate in efficiency gains there is also evidence of an ownership effect on the level and pattern of efficiency change finally competition keeps building pace even in the re regulation period and technological improvements are not hampered by the tightening of prudential norms

banking deregulation and allocative efficiency in pakistan abstractthis article examines the impact of deregulation policies on allocative efficiency of banks in pakistan it investigates whether deregulation has impacted the pattern of allocative efficiency of banks and explores which bank ownership segment has been more responsive it uses data from 1991 to 2005 and explicitly models allocative inefficiency by using the translog shadow cost share system empirical results show that overregulation and imperfect market structure hampers the ability of banks to make competitive decisions we find evidence of allocative inefficiency leading to over utilization of labour and deposits vis a vis operating cost empirical results for time varying allocative efficiency show declining levels of allocative inefficiency for state owned and private banks in post reform period deregulation policies induce state owned banks to decrease over utilization of labour relative to deposits and operating cost while private banks succeed in using operating cost closer to optimal leve

bank competition financial reform and institutions the importance of being developed abstract in this paper i estimate the degree of market power at the bank level for 84 banking systems worldwide subsequently i analyze the sources of bank competition placing emphasis on the impact of financial reform and the quality of institutions i find that financial liberalization policies reduce the market power of banks in developed countries with advanced institutions in contrast banking competition does not improve at the same pace in countries with weaker institutions and a lower level of institutional development the results hold across a wide array of identification tests and estimation methods the main policy implication to be drawn is that a certain level of institutional development is a precondition for the success of reforms aimed at enhancing the competition and efficiency of banking markets

imperfect competition risk taking and regulation in banking abstract we asses the welfare implications of banking competition under various deposit insurance regimes in a model of imperfect competition with social failure costs and where banks are subject to limited liability we study the links between competition for deposits and risk taking incentives and conclude that the welfare performance of the market and the appropriateness of alternative regulatory measures depend on the degree of rivalry and the deposit insurance regime specifically when competition is intense and the social failure costs high deposit rates are excessive both in a free market and with risk based insurance if insurance premiums are insensitive to risk then the same is true even if there is no social cost of failure we find also that in an uninsured market with nonobservable portfolio risk or with flat premium deposit insurance deposit regulation rate regulation or deposit limits and direct asset restrictions are complementary tools to improve welfare in an uninsured market with observable portfolio risk or with risk based insurance deposit regulation may be a sufficient instrument to improve welfare

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

differential impact of korean banking system reforms on bank productivity abstract we study the impact of banking system reforms during a crisis following a period of undisciplined lending regulatory changes aimed at strengthening the banks capital structure and risk management practices do not have a uniform impact on bank productivity but rather favor financially sound or strategically privileged banks we present evidence documenting the differential impact of regulatory reforms on korean commercial bank productivity over the period 1995 2005 average technical efficiency of banks decreased during the financial crisis of 1997 1998 it improved following the subsequent bank restructuring and continued to improve through 2005 the capital adequacy ratio is positively associated with banks technical efficiency the non performing loans ratio is negatively associated with technical efficiency both relationships are accentuated during the crisis but attenuated after the reforms

economic consequences of deregulation evidence from the removal of voting cap in indian banks abstract we examine the effect of the 2005 banking regulation amendment bill and the 2011 banking laws amendment bill proposals for removal of the 10 percent voting rights cap in indian banks the 2011 banking laws bill was first introduced in 2005 but lapsed with the dissolution of the 14th lok sabha the bill was passed in december 2012 and raised the voting cap in private sector banks from 10 to 26 percent we present evidence that the removal of the voting cap enhances the value of votes of bank stocks by reducing the wedge between cash flow and control rights thus increasing monitoring and the probability of takeover post deregulation analysis reveals that the passage of the bill was followed by increasing blockholders number and percentage of shares held in larger and government banks furthermore a stronger negative relationship between banks profitability and size as well as share of non performing loans is observed this study makes an important contribution to the growing literature on the valuation impact and efficiency gains of liberalization of ownership restrictions in emerging markets as well as the rich literature on corporate governance and control relating to the value of voting privilege in companies with disparate voting rights

expo power utility a flexible form for absolute and relative risk aversion a new utility function which i call expo power is proposed that exhibits decreasing constant or increasing absolute risk aversion and decreasing or increasing relative risk aversion depending on parameter values numerical analysis suggests that the expo power function performs well in incorporating these risk preference structures and that arbitrary risk preference specifications may lead to biased risk response estimates

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

efficiency dynamics in indian banking a conditional directional distance approach abstract the paper contributes to the contemporary research on bank efficiency in india we analyze the efficiency dynamics of the indian banking industry from 2004 to 2012 based on the recent methodological developments of the conditional and unconditional directional distances introduced by daraio and simar 2014 we apply a conditional directional distance estimator in order to analyze the dynamic effects of industry s performance levels the results indicate that foreign banks perform better compared to national and domestic private banks there is also evidence of technological change at the period before the global financial crisis however during and after the global financial crisis these gains diminished the evidence suggests that national banks fail to sustain their high performance levels gained after the industry s restructuring period finally the findings support the view that ownership structure affects banks technical efficiency levels

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

corporate profitability and the dynamics of competition in emerging markets a time series analysis the paper presents time series analyses of corporate profitability in seven leading developing countries dcs using the common methodology of the persistence of profitability pp studies and systematically compares the results with those for advanced countries acs surprisingly both short and long term persistence of profitability for dcs are found to be lower than those for acs the paper concentrates on economic explanations for these findings it also reports the results on the persistence of the two components of profitability output capital ratios and profit margins these too raise important general issues of economic interpretation for pp studies which are outlined

the cyclical effects of the basel ii capital requirements abstract capital requirements play a key role in the supervision and regulation of banks the basel committee on banking supervision is in the process of changing the current framework by introducing risk sensitive capital charges some fear that this will unduly increase the volatility of regulatory capital furthermore by limiting the banks ability to lend capital requirements may exacerbate an economic downturn the paper examines the problem of capital induced lending cycles and their pro cyclical effect on the macroeconomy in greater detail it finds that the capital buffer that banks hold on top of the required minimum capital plays a crucial role in mitigating the impact of the volatility of capital requirements

is the efficient market hypothesis day of the week dependent evidence from the banking sector in this article we propose a new hypothesis that the efficient market hypothesis is day of the week dependent we apply the test to firms belonging to the banking sector and listed on the nyse we find significant evidence that the efficient market hypothesis is day of the week dependent overall for only 62 of firms the unit root null hypothesis is rejected on all the five trading days we also discover that when investors do not account for unit root properties in devising trading strategies they obtain spurious profits

determinants of bank cost efficiency in transition economies evidence for latin america central and eastern europe and south east asia in this study we adopt wang s 2002 heteroscedastic stochastic frontier model which allows us to investigate bank cost efficiency and to measure the marginal effects of some variables on both the level and the variability of inefficiency in recent years the financial crisis has significantly affected the banking systems of the transition countries hence the efficiency is of major importance for the stability of the banks regarding the determinants of efficiency we find evidence that banks that follow a more cautious strategy characterized by lower risk appetite and average expectations on profitability have higher cost efficiency we also find that traditional deposit taking and loan making still remain the most efficient activity of the banks additionally the results showed that a higher gross domestic product growth rate implies an increase in the inefficiency level indicating an unsustainable bank management behaviour which in periods of economic growth adopts policies that can generate

your money or your life a prescriptive model for health safety and consumption decisions in this paper we develop a conceptual framework and model for valuing risks to an individual s health and life and to support decision making about investments in health quality of life and safety our treatment of health risks in the model builds on the popular quality adjusted life year qaly framework that balances health quality and length of life issues we extend this framework to consider financial concerns as well as health quality and length of life our model considers uncertainty in income and health and incorporates the decision maker s ability to adjust consumption over time in response to changes in expectations about health and income we use this model to study the optimal tradeoffs between financial gains or losses and improvements or reductions in health or longevity and apply it in two example medical decision problems

the impact of deregulation on price and non price competition in the portuguese deposits market abstract the portuguese deposits market experienced a pronounced deregulation phase from 1986 to 1992 during that period the situation moved from a highly regulated market in which government controlled institutions accounted for more than 90 of the market to a complete integration into the fully liberalised european internal market this paper studies the evolution of market power and non price competition during that deregulation process using panel data a system of three equations was estimated representing optimality decisions for deposit rates advertising expenditures and branches an important conclusion is that interest rate and entry deregulation were associated with an increase in both price and non price competition the small foreign owned banks were found to have virtually no market power in deposits on the other hand although no direct relationship between market power and market share was found significant market power was detected for the wholesale and banks that existed since before the revolution thus mergers between large banks are not likely to directly increase market power for the participating firms although the association found between market power and concentration suggests that such mergers may increase the banking industry s profits

exploring the nexus between banking sector reform and performance evidence from newly acceded eu countries abstract the aim of this study is to examine the relationship between banking sector reform and bank performance measured in terms of efficiency total factor productivity growth and net interest margin accounting for the effects through competition and bank risk taking to this end we develop an empirical model of bank performance which is consistently estimated using recent econometric techniques the model is applied to bank panel data from ten newly acceded eu countries the results indicate that both banking sector reform and competition exert a positive impact on bank efficiency while the effect of reform on total factor productivity growth is significant only toward the end of the reform process finally the effect of capital and credit risk on bank performance is in most cases negative while it seems that higher liquid assets reduce the efficiency and productivity of banks

biased technical change and the malmquist productivity index the malmquist productivity index has many attractive features one is that it can be epxressed as the product of a technical efficiency change index and a technical change index in this paper we express the technical change index as the product of a magnitude index and a bias index we then express the bias index as the product of an output bias index and an input bias index and we state conditions under which each bias index makes no contribution to productivity change

preferences for consumption streams scale invariance correlation aversion and delay aversion under mortality risk lifetime financial decisions often require a decision analyst to elicit a decision maker s preferences for consumption streams in assessing such preferences the analyst might look for a set of reasonable conditions to check when selecting a utility form we provide such a set of conditions and show that they lead to the multiplicative expo power mep utility form some of our conditions involve trade offs under certainty and others relate to choices under uncertainty in the deterministic setting we invoke increasingness continuous differentiability mutual preferential independence and preferential scale invariance in the uncertainty setting we invoke componentwise risk aversion a utility independence condition and correlation aversion we apply the mep utility in a life cycle consumption planning problem under mortality risk in this context we find that the correlation averse mep utility is more realistic than and as tractable as the popular correlation neutral additive power and additive exponential utilities we show that the correlation averse decision maker prefers to consume more in life and leave less behind in death in addition we demonstrate that the correlation averse decision maker is more averse to delaying consumption in the face of mortality risk

cost and income based measures of human capital human capital is increasingly believed to play an important role in the growth process however adequately measuring its stock remains controversial in this paper three general approaches to measurement are identified cost based income based and educational stock based this survey focuses on the first two approaches and provides a critical review of the theories and their applications to data from a range of countries particular emphasis is placed upon the work of jorgenson and fraumeni 1989 1992 and some new results for new zealand based upon their approach are also presented

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

competitive conditions among the major british banks this paper reports an empirical assessment of competitive conditions among the major british banks during a period of major structural change specifically estimates of the rosse panzar h statistic are reported for a panel of 12 banks for the period 1980 2004 the sample banks correspond closely to the major british banking groups specified by the british banking association the robustness of the results of the rosse panzar methodology is tested by estimating the ratio of lerner indices obtained from interest rate setting equations the results confirm the consensus finding that competition in british banking is most accurately characterised by the theoretical model of monopolistic competition there is evidence that the intensity of competition in the core market for bank lending remained approximately unchanged throughout the 1980s and 1990s however competition appears to have become less intense in the non core off balance sheet business of british banks

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

the effects of deregulation on the performance of financial institutions the case of spanish savings banks this paper examines the impact of regulatory reform on the performance of spanish savings banks the focus is whether increased competition brought on by deregulation affected performance of banks over time output technical efficiency which is defined in terms of the production possibility frontier is also examined empirical results show declining levels of output technical efficiency along with a significantly high rate of technical progress in spite of declining technical efficiency during this period evidence of an increasing trend in productivity growth is found

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

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

regulations market structure institutions and the cost of financial intermediation this paper examines the impact of bank regulations market structure and national institutions on bank net interest margins and overhead costs using data on over 1400 banks across 72 countries while controlling for bankspecific characteristics the data indicate that tighter regulations on bank entry and bank activities boost the cost of financial intermediation inflation also exerts a robust positive impact on bank margins and overhead costs while concentration is positively associated with net interest margins this relationship breaksdownwhencontrolling for regulatory impediments to competition and inflation furthermore bank regulations become insignificant when controlling for national indicators of economic freedom or property rights protection while these institutional indicators robustly explain cross bank net interest margins and overhead expenditures thus bank regulations cannot be viewed in isolation they reflect broad national approaches to private property and competition

financial deregulation and total factor productivity change an empirical study of turkish commercial banks abstract in january 1980 a new liberal economic policy was adopted in turkey to promote financial market development and increase the efficiency and productivity of the financial sector by fostering competition among banks as a result of this policy the turkish banking system witnessed a series of legal structural and institutional changes throughout the 1980s to enhance their competitive viability turkish banks responded by streamlining their operations and investing in new technology utilizing a dea type malmquist total factor productivity change index we examine productivity growth efficiency change and technical progress in turkish commercial banks during the deregulation of financial markets in turkey we found that all forms of turkish banks although in different magnitudes have recorded significant productivity gains driven mostly by efficiency increases rather than technical progress efficiency increases however were mostly owing to improved resource management practices rather than improved scales our results also indicate that private banks began to close their performance gap with public banks in the new environment

bank concentration and retail interest rates abstract the recent wave of mergers in the euro area raises the question whether the increase in concentration has offset the increase in competition in european banking through deregulation we test this question by estimating a simple cournot model of bank pricing we construct country and product specific measures of bank concentration and find that for loans and demand deposits increasing concentration may have resulted in less competitive pricing by banks whereas for savings and time deposits the model is rejected suggesting increases in contestability and or efficiency in these markets finally the paper discusses some implications for tests of the effect of concentration on monetary policy transmission

banks and liquidity banks perform valuable activities on either side of their balance sheets on the asset side they make loans to difficult illiquid borrowers on the liability side they provide liquidity on demand to depositors but there seems to be a fundamental incompatibility between the two activities the demands for liquidity by depositors may arrive at an inconvenient time and force the fire sale liquidation of illiquid assets furthermore because depositors are served in sequence the prospect of fire sales may precipitate self fulfilling runs that further jeopardize bank activities is this an aberration stemming from historical accident and enshrined by deposit insurance or is there logic hitherto unnoticed for the bank s choice of activities our recent work suggests that the answer to the latter question is yes in order to describe why a bank s fragile capital structure allows it to create liquidity and to explain why bank loans are illiquid we present a simple example based on diamond and rajan 2001a

habit formation from correlation aversion making plans about how much to consume and how much to invest in risky assets over an uncertain lifetime is a fundamental economic challenge the leading models of this planning problem use either additive or habit forming preferences for the most part these models assume an individual is either correlation neutral or correlation seeking in consumption respectively in this paper we introduce two habit forming correlation averse preference models with these preferences we find closed form solutions to the classic consumption and portfolio planning problem our solutions recommend that a correlation averse decision maker follow a habit in their consumption plans while such habits traditionally have been associated with correlation seeking preferences our model leads to consumption habits from correlation averse preferences

shareholder value creation in japanese banking this paper advances the study of fiordelisi and molyneux 2010 by examining the shareholder value efficiency and its determinants for a large sample of japanese banks between 1999 and 2011 a new specifically tailored measure of the economic value added approach based on the shadow price of equity is developed in order to account for specific characteristics of the japanese banking system this new shareholder value measure is then used in a dynamic panel data model as a linear function of various bank risk bank specific and macroeconomic variables this study finds that cost efficiency gains credit risk and bank size are the most important factors in explaining the shareholder value creation in japanese banking cost efficiency changes are also found to significantly influence cost of equity capital

the joint estimation of bank level market power and efficiency the aim of this study is to provide a methodology for the joint estimation of efficiency and market power of individual banks the proposed method utilizes the separate implications of the new empirical industrial organization and the stochastic frontier literatures and suggests identification using the local maximum likelihood lml technique through lml estimation of market power of individual banks becomes feasible while a number of restrictive theoretical and empirical assumptions are relaxed the empirical analysis is carried out on the basis of emu bank data market power estimates indicate fairly competitive conduct in general however heterogeneity in market power estimates is substantial across banks the latter result suggests that the practice of some banks deviates from the average fairly competitive behavior a finding that has important policy implications finally efficiency and market power present a negative relationship which is in line with the so called quiet life hypothesis

the determinants of bank interest rate margins an international study abstract this paper studies the determinants of bank net interest margins nims in six selected european countries and the us during the period 1988 1995 for a sample of 614 banks we apply the ho and saunders model ho t saunders a 1981 the determinants of bank interest margins theory and empirical evidence journal of financial and quantitative analyses 16 581 600 to a multicountry setting and decompose bank margins into a regulatory component a market structure component and a risk premium component the regulatory components in the form of interest rate restrictions on deposits reserve requirements and capital to asset ratios have a significant impact on banks nims the empirical results suggest an important policy trade off between assuring bank solvency high capital to asset ratios and lowering the cost of financial services to consumers low nims the more segmented or restricted the banking system both geographically and by activity the larger appears to be the monopoly power of existing banks and the higher their spreads macro interest rate volatility was found to have a significant impact on bank nims this suggests that macro policies consistent with reduced interest rate volatility could have a positive effect in reducing bank margins

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded