Assessing Output and Productivity Growth in the Banking Industry

This paper assesses the evolution of output and productivity in the Greek banking industry for the period 1990-2006. Three main categories of bank output were estimated based on modern theoretical approaches, while for the aggregation and estimation of output and inputs and the estimation of productivity (partial and total factor) we relied on the index number method (Tornqvist index). Additionally, we considered the effect of labor quality on banks’ productivity and using a growth accounting framework we examined the contribution of total factor productivity (TFP) to bank output growth. The results show that bank output and labor productivity increased considerably during the period under examination, outpacing the respective GDP growth and labor productivity of the Greek economy. Capital productivity and TFP of the Greek banking industry have also improved remarkably mainly since 1999, as a result of the structural changes that took place within the industry, capital investments (mainly in IT equipment) as well as improvement in the quality of human capital.Bank output; user-cost approach; total factor productivity; Tornqvist index; growth accounting; labor quality

Common agriculture police in the EU, direct payments, solvency and income

This study examines the impact of direct payments, which include all subsidies, of the EU’s Common Agriculture Policy (CAP) on agriculture income as measured by the net value added. We also control for solvency. Despite the magnitude of CAP on the EU budget, few studies investigate the impact of direct payments on income in the aftermath of the financial crisis. This is surprising given the importance of agriculture for the economic recovery of the EU that remains anaemic more than a decade post the crisis. Design/methodology/approach: We employ agriculture data for all twenty-eight EU Member States. The data comes from the public Farm Accountancy Data Network (FADN) of the EU. In terms of methodology we employ panel regression and panel Vector Autoregression analysis (panel VAR) to take into account possible endogeneity issues

How low for how long? From a monetary policy perspective

This paper examines the impact of euro-area quantitative easing on the banking industry. We provide a dynamic threshold panel model that endogenously identifies the low threshold of the monetary policy rate. And we also provide insights into the long vs the short-run impact of quantitative easing on bank-level resilience and competition. Results show that there is a negative relationship between low rates and bank risk.. For the low levels of main refinancing operation, which is below 0.1097%, quantitative easing would reduce bank resilience, whereas for higher thresholds it will increase bank resilience. We also report the long-run impact of UMP on bank risk, as well as the short-run dynamics using a panel VAR model. This paper provides empirical estimates of low thresholds for the ECB’s rate and responses to shocks in monetary policy. The main findings of our analysis show that asymmetry is present because in a low regime we observe that an increase in MRO would decrease Z-score, increasing bank risk and reducing bank stability. Policy implications are of interest in the current conjecture that there are voices for hikes in the interest rates despite the anemic euro-area recovery and the geopolitical tensions

The impact of debt, taxation and financial crisis on earnings management: the case of Greece

The purpose of this study is to empirically investigate the Greek firms’ earnings management policies compared with debt, taxation and the financial crisis. In this paper, we show that existed measures of real earnings management, whether corrected for performance or not, rely crucially on strong assumptions. We provide a novel modeling that permits panel structure so as to correct for heterogeneity across firms while permitting to determine endogenously the number of underlying firm-groups in the data generating process. The empirical results indicate that Greek firms are likely to reduce earnings manipulation activities when they face liquidity risk. Taxation and financial crisis have a negative and positive effect on earnings management, respectively. The effect of debt, taxation and financial crisis on earnings management has never been investigated in Greece. The empirical results offer valuable information to shareholders and investors as they can understand how some main factors, such as debt, taxation and financial crisis, influence firm’s accounting practices

Measuring the efficiency and productivity of U.K. insurance market

The U.K. insurance industry has a dominant international presence, suggesting strong competitiveness and performance. Yet, its efficiency and productivity has rarely being investigated. The purpose of this paper is to provide an overview of insurers' performance in the U.K. insurance market from 1996 to 2017, using stochastic frontier analysis to measure efficiency scores and productivity at the firm level. Results show the U.K. insurance industry could improve by about 40% in terms of cost efficiency and by 70% in terms of profit efficiency. In addition, our model reveals a higher cost efficiency score compared to profit efficiency, implying that there are higher inefficiencies on the income side of the insurance industry as measured by our profit function. In terms of total factor productivity (TFP) growth, we report a steady decline over time while on average is negative. By decomposing TFP growth into its underlying components, we reveal that the reported negative trend in TFP growth over time has mainly been driven by the enhanced competition that resulted in a drop in markup, while the scale and cost efficiency has also driven TFP growth down. However, from a positive point of view, we report evidence of both β-convergence and σ-convergence in cost and profit efficiency

Does R&D, human capital and FDI matter for TFP in OECD countries?

This study investigates the interplay between research and development (R&D), human capital (HC), foreign direct investment (FDI) and total factor productivity (TFP) in OECD countries. We divide the sample into two sub-groups; the European and the non-European states so as to account for underlying country heterogeneity. The analysis follows a panel data approach over the period 1995–2015, taking into account the modelling on non-stationarity, long-run relationships and short-run dynamics with a panel VAR. Both R&D and HC have a positive effect on TFP, whilst FDI has a positive and significant effect only in the case of non-European countries. Moreover, the contribution of R&D is higher than that of HC and FDI in all cases. Thus, based on these findings, policymakers should design and implement policies to increase resources invested in R&D, with a consistent ongoing spending review, to attract foreign direct investment, especially for the majority of the European and some of the non-European countries and to improve education system on a more productive innovation and research base

On intellectual capital efficiency and shariah governance in Islamic banking business model

This paper empirically investigates whether intellectual capital (IC) and shariah governance jointly affect the economic performance of Islamic banks (IBs). In contrast to prior research, this paper disaggregate IC and corporate governance features and examine whether the two are jointly related to economic performance. These relationships are further explored before, during and after the financial crisis based on a sample of 64 Islamic banks operating in different regions during the period 2007–2014. The required data to calculate different constituents of IC efficiency and governance mechanism is hand collected from 512 annual reports. After controlling for other corporate governance and bank‐specific characteristics (operational type, bank size, listing status, risk, type of auditor, accounting standard and region), we find both intellectual capital efficiency and shariah governance proxies (size and dominance of prominent scholars of shariah supervisory board) to have a significant positive relationship with accounting measure of performance. However, based on market performance measure, only one proxy for shariah governance mechanism, that is, prominent scholars on SSB, is found to be significant but in the negative direction. These results provide important insights into the relationship between IC efficiency, corporate governance and performance in Islamic banking business model and have policy and practical implications

Developments in the efficiency of the Malaysian banking sector: the impacts of financial disruptions and exchange rate regimes

In the mid-1990s, East Asian countries have experienced severe financial crisis that were followed by deep economic downturns. A variety of methodologies have been used to explain the Asian financial crisis. However, the impact of the Asian financial crisis of 1997 on the efficiency of the banking sector has not been studied yet. The present article attempts to provide new empirical evidence on the efficiency of the Malaysian banking sector around the Asian financial crisis. The efficiency estimates of individual banks are evaluated by using the non-parametric data envelopment analysis (DEA) method. The results indicate that the foreign banks have exhibited higher technical efficiency compared to their domestic bank counterparts. However, the results suggest that the foreign banks were severely affected by the Asian financial crisis, implying that the foreign banks are not insulated from unexpected events like the Asian financial crisis of 1997

European banking industry Sources of income and profitability

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