109 research outputs found
A Productivity analysis of Eastern European banking taking into account risk decomposition and environmental variables
This paper develops a new Luenberger productivity which is applied to a technology where the desirable and undesirable outputs are jointly produced and are possibly negative. The components of this Luenberger productivity index - the efficiency change and the components of the technological shift - are then decomposed into factors determined by the technology, adjusted for ârisk and environmentâ, ârisk managementâ and âenvironmental effectsâ. The method is applied to Central and Eastern European banks operating during 1998â2003 utilising three alternative input/output methodologies (intermediation, production and profit/revenue). Additionally, the comparative analysis of the sensitivity of the productivity indices in the choice of the methodologies is undertaken using statistical and kernel density tests. It is found that the main driver of productivity change in Central and Eastern European banks is technological improvement, which, in the beginning of the analysed period, hinged on the banksâ ability to capitalise on advanced technology and successfully take into account risk and environmental factors. Whereas, in the later sampled periods, we show that one of the most important factors of technological improvement/decline is risk management. Finally, the tests employed confirm previous findings, such as Pasiouras (2008) in this journal, that different input/output methodologies produce statistically different productivity results. Indeed, we also find that external factors, such as a risk in the economy and banking production, and a âcorruption perceptionâ affect the productivity of banks.Luenberger productivity index; DEA; banking; undesirable outputs; negative data.
Environmental Factors Affecting Hong Kong Banking: A Post-Asian Financial Crisis Efficiency Analysis
Within the banking efficiency analysis literature there is a dearth of studies which have considered how banks have âsurvivedâ the Asian financial crisis of the late 1990s. Considering the profound changes that have occurred in the regionâs financial systems since then, such an analysis is both timely and warranted. This paper examines the evolution of Hong Kongâs banking industryâs efficiency and its macroeconomic determinants through the prism of two alternative approaches to banking production based on the intermediation and services-producing goals of bank management over the post-crisis period. Within this research strategy we employ Toneâs (2001) Slacks-Based Model (SBM) combining it with recent bootstrapping techniques, namely the non-parametric truncated regression analysis suggested by Simar and Wilson (2007) and Simar and Zelenyukâs (2007) group-wise heterogeneous sub-sampling approach. We find that there was a significant negative effect on Hong Kong bank efficiency in 2001, which we ascribe to the fallout from the terrorist attacks in America in 9/11 and to the completion of deposit rate deregulation that year. However, post 2001 most banks have reported a steady increase in efficiency leading to a better âintermediationâ and âproductionâ of activities than in the base year of 2000, with the SARS epidemic having surprisingly little effect in 2003. It was also interesting to find that the smaller banks were more efficient than the larger banks, but the latter were also able to enjoy economies of scale. This size factor was linked to the exportability of financial services. Other environmental factors found to be significantly impacting on bank efficiency were private consumption and housing rent.Finance and Banking; Productivity; Efficiency.
Accounting for environmental factors, bias and negative numbers in efficiency estimation: A bootstrapping application to the Hong Kong banking sector
This paper examines the evolution of Hong Kongâs banking industryâs technical efficiency, and its macroeconomic determinants, during the period 2000-2006 through the prism of two alternative approaches to efficiency estimation, namely the intermediation and production approaches. Using a modified (Sharp, Meng and Liu, 2006) slacks-based model (Tone, 2001), and purging the efficiency estimates for random errors (Simar and Zelenyuk, 2007) , we firstly analyse the trends in bank efficiency. We then identify the âenvironmentalâ factors that significantly affect the efficiency scores using an adaptation (Kenjegalieva et al. 2009) of the truncated regression approach suggested by Simar and Wilson. 2007). The first part of the analysis reveals that the Hong Kong banking industry suffered a severe downturn in estimated technical efficiency during 2001. It subsequently recovered, posting average efficiency scores of 92 per cent and 85 percent under the intermediation and production approaches respectively by the end of 2006. As for the sub-group analysis, commercial banks are, on average, shown to be the most efficient operators, while the investment bank group are shown to be the least efficient. Finally, with respect to the truncated regression analysis, the results suggest that smaller banks are more efficient than their larger counterparts, although larger banks are still able to enjoy gains from scale economies and benefit from the export of financial services. Moreover, private housing rent and the net export of goods and services are found to be negatively correlated with bank efficiency, while private consumption is shown to be positively correlated.Hong Kong Banks; DEA; Slacks; Environmental factors, Negative numbers; Bias.
A productivity analysis of Eastern European banking taking into account risk decomposition and environmental variables
This paper develops a new Luenberger productivity which is applied to a technology where the desirable and undesirable outputs are jointly produced and are possibly negative. The components of this Luenberger productivity index - the efficiency change and the components of the technological shift - are then decomposed into factors determined by the technology, adjusted for ârisk and environmentâ, ârisk managementâ and âenvironmental effectsâ. The method is applied to Central and Eastern European banks operating during 1998â2003 utilising three alternative input/output methodologies (intermediation, production and profit/revenue). Additionally, the comparative analysis of the sensitivity of the productivity indices in the choice of the methodologies is undertaken using statistical and kernel density tests. It is found that the main driver of productivity change in Central and Eastern European banks is technological improvement, which, in the beginning of the analysed period, hinged on the banksâ ability to capitalise on advanced technology and successfully take into account risk and environmental factors. Whereas, in the later sampled periods, we show that one of the most important factors of technological improvement/decline is risk management. Finally, the tests employed confirm previous findings, such as Pasiouras (2008) in this journal, that different input/output methodologies produce statistically different productivity results. Indeed, we also find that external factors, such as a risk in the economy and banking production, and a âcorruption perceptionâ affect the productivity of banks
Economies of scale in UK building societies: a re-appraisal using an entry/exit model
This study advances an entry/exit model to analyse the scale efficiency of UK
building societies. We find that there are considerable divergences across building
societies in levels of scale efficiency and also in technological change during the sample
period 1992-1997. The paper also finds that scale economies and technological change
estimates are dependent on whether the econometrician balances a panel data set or
utilises the entry/exit model based on Dionne et alâs (1998) specification. In general,
scale economies in UK building societies are found to be more significant and more
pervasive than in previous studies
The economics of managerialism and the drive for value for money in policing: best value performance indicators vs. efficiency rankings
The UK has recently proposed to develop a set of criteria whereby the economic analysis of police force efficiency is to be made standard. This follows a strategy of aiming for improvement through managerialism and Best Value Performance Indicators (BVPIs), similar to those implemented by US police forces after the Government Performance and Results Act 1993. In this paper we attempt to put this recent development of efficiency targeting into a UK historical/evolutionary context and discuss the economic methodologies and techniques behind creating best practice police reference sets. In addition, we present results from three techniques that have been advanced as tools to rank forces in the UK media and academic literature, and show how simple BVPI averaging can bias efficiency ranking of police forces
The Economics modelling of policing and the measurement of efficiency
A recent report (Public Service Productivity Panel (PSP) (2000)) has developed a set
of criteria whereby the economic analysis of police force efficiency is to be made
standard. An aim of the governmentâs drive for efficiency rankings is to enable the
Home Office to determine a âbest practiceâ reference set of forces, and thereby allow
differential funding of police forces. This paper attempts to put this recent
development into a historical/evolutionary context and discusses: the economic
methodologies behind creating best practice reference sets; the techniques proposed
by the PSP (2000) report; and how best to estimate the production of police forces
Police efficiency in offences cleared: an analysis of English 'basic command units'
The job of policing covers a wide range of activities including, traditional crime detection and punishment, and the non-traditional aspects such as community meetings. However, the major focus of policing is on crime detection and prevention. This paper specifically considers these functions with respect to Basic Command Units (BCUs) or âprecinctsâ, and determines their relative efficiency in this key area using DEA and the little used stochastic distance frontier. Relative Efficiency is measured in the context of a âpure production approachâ relating the incidence of various crimes (inputs) to the corresponding clear offences (outputs). This type of efficiency ranking can also help in further analysing best practice in order to reduce crime and the fear of crime in many police forces. The powerful non-linearity established in this relationship has important implications for police resourcing and funding as highlighted by Houpis et al (2001
The use of 'performance radars' as a predictor of police force efficiency: an analysis of UK home office policy
Over the last 20 years, governments around the world have implemented strategies and targets to ensure that public services are efficient in the management of resources. In the UK this common agenda has led to the recent âPolice Reform Act 2002â in which consideration was given on how police forces can show âValue for Moneyâ based on government strategic policy targets. This paper discusses the âPerformance Radarâ technique proposed by the Home Office in the United Kingdom as a new public policy objective in order to assess police force performance. We show, utilising an innovative nonparametric modelling strategy, that environmental factors and revenues can have significant effects on whether a police force is deemed to be efficient. Further, the results presents evidence that survey data should not be utilised as a basis to assess police performance
English and Welsh Police Force Efficiency: Demonstration Project Peer Review Results
The recent report by the Public Service Productivity Panel (PSPP) (2000), proposed
that non-parametric (DEA) and parametric (SFA) modelling techniques be utilised as
an aid to allow efficiency bandings of police forces. To determine whether these
techniques could be utilised, a data set approved by the Home Office Steering
Committee was compiled, and a report commissioned to present the results of the
Demonstration Project (DP). This paper presents abridged results from a Peer Review
report on the DP showing that the given data set could indeed produce efficiency
bandings and hence facilitate future discussions concerning differential payments of
funds to English and Welsh police forces. Due to the sensitivity of the results, the
police force names have been changed
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