Technical inefficiency and output scale in banking and industry
DOI:
https://doi.org/10.17811/ebl.9.3.2020.270-278Abstract
According to this paper, technical inefficiency unrelated to problem loans on the part of banks, would result in loan expansion, inducing, in turn, firms that rely heavily on bank borrowing, to expand their production accordingly as they can benefit from higher lending. Increased scale of production fosters economies of scale, which can compensate for the adverse effects of technical inefficiency on cost, reinforcing at the same time sales. Production can expand even further if firms maximize their profit by acknowledging their own technical inefficiency in the form of scale inefficiency.
References
Admati, Anat and Martin Hellwig (2013), The Bankers’ New Clothes, Princeton University Press. Princeton, NJ.
Aiello, Francesco and Graziella Bonanno (2017), On the sources of heterogeneity in banking efficiency literature, Journal of Economic Surveys, 32(1), 194-225.
Berger, Allen N. and Robert DeYoung (1997), Problem loans and cost efficiency in commercial banks, Journal of Banking and Finance, 21(6), 849-870.
Bruno, Valentina, Ilhyock Shim and Hyun Song Shin (2017), Comparative assessment of macroprudential policies, Journal of Financial Stability, 28, 183-202.
Buerger, Dave (2018), Three inefficiencies financial institutions must correct immediately, The Financial Brand, December 19, 2018. https://thefinancialbrand.com/78480/digital-lending-solution-technologies-cx-experience/
Cornes, Richard and Jun-ichi Itaya (2016), Alternative objectives in an oligopoly model: An aggregative game approach, CESifo Working Paper Series 6191. https://www.ifo.de/DocDL/cesifo1_wp6191.pdf
DeAngelo, Harry and René M.Stulz (2015), Liquid-claim production, risk management, and bank capital structure: Why high leverage is optimal for banks, Journal of Financial Economics, 116(2), 219-236.
Hughes, Joseph P., Loretta J. Mester and Choon-Geol Moon (2001), Are scale economies in banking elusive or illusive? Evidence obtained by incorporating capital structure and risk-taking into models of bank production, Journal of Banking and Finance, 25(12), 2169-2208.
Khumbhakar, Subal C. (2006), Specification and estimation of nonstandard profit functions, Empirical Economics, 31, 243-260.
Mirzaei, Ali and Tomoe Moore (2019), Real effect of bank efficiency: Evidence from disaggregated manufacturing sectors, Economica, 86, 87-115.
Shin, Hyun Song (2015), Macroprudential tools, their limits and their connection with monetary policy, BIS. https://pdfs.semanticscholar.org/45a2/e16c77da2d0572adf940b8a449de47ca14d7.pdf?_ga=2.9121078.2005111820.1577352218-1378868370.1576920930
Smets, Frank (2014), Financial stability and monetary policy: How closely interlinked?, International Journal of Central Banking, 3(2), 263-300.
Downloads
Published
How to Cite
Issue
Section
License
The works published in this journal are subject to the following terms:
1. Oviedo University Press (the publisher) retains the property rights (copyright) of published works, and encourages and enables the reuse of the same under the license specified in paragraph 2.
© Ediuno. Ediciones de la Universidad de Oviedo / Oviedo University Press
2. The works are published in the online edition of the journal under a Creative Commons Attribution-Non Commercial-Non Derives 3.0 Spain (legal text). You can copy, use, distribute, transmit and publicly display, provided that: i) you cite the author and the original source of publication (journal, publisher and URL of the work), ii) they are not used for commercial purposes, iii) mentions the existence and specifications of this license.
3. Conditions of self-archiving. The author can archive the post-print version of the article (publisher’s version) on the author’s personal website and/or on the web of the institution where he belong, including a link to the page of the journal and putting the way of citation of the work. Economics and Business Letters and its URL https://reunido.uniovi.es/index.php/EBL/index are the only authorized source for correctly giving the reference of the publisher’s version in every mention of the article.
