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Bank productivity and performance groups: A decomposition approach based upon the Luenberger productivity indicator

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Title: Bank productivity and performance groups: A decomposition approach based upon the Luenberger productivity indicator
Authors: Epure, Mircea1 mircea.epure@uab.cat, Kerstens, Kristiaan2 k.kerstens@ieseg.fr, Prior, Diego1,2 diego.prior@uab.es
Source: European Journal of Operational Research. Jun2011, Vol. 211 Issue 3, p630-641. 12p.
Subjects: Banking industry & economics, Performance, Decomposition method, Savings banks, Strategic planning, Technological innovations, Bank loans, Random variables
Abstract: Abstract: The purpose of this paper is twofold. First, in the framework of the strategic groups’ literature, it analyZes changes in productivity and efficiency of Spanish private and savings banks over an eight-year period (1998–2006). Second, by adapting the decomposition of the Malmquist productivity indices suggested by , it proposes similar components decomposing the Luenberger productivity indicator. Initially, productivity is decomposed into technological and efficiency changes. Thereafter, this efficiency change is decomposed into pure efficiency, scale and congestion changes. Empirical results demonstrate that productivity improvements are partially due to technological innovation. Furthermore, it is shown how the competition between private and savings banks develops in terms of the analyzed productivity and efficiency components. While private banks enjoy better efficiency change, savings banks contribute more to technological progress. Consequently, the Luenberger components are used as cluster analysis inputs. Thus, economic interpretations of the resulting performance groups are made via key differences in productivity components. Finally, following the strategic groups’ literature, supplementary insights are gained by linking these performance groups with banking ratios. [Copyright &y& Elsevier]
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Database: Engineering Source
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Abstract:Abstract: The purpose of this paper is twofold. First, in the framework of the strategic groups’ literature, it analyZes changes in productivity and efficiency of Spanish private and savings banks over an eight-year period (1998–2006). Second, by adapting the decomposition of the Malmquist productivity indices suggested by , it proposes similar components decomposing the Luenberger productivity indicator. Initially, productivity is decomposed into technological and efficiency changes. Thereafter, this efficiency change is decomposed into pure efficiency, scale and congestion changes. Empirical results demonstrate that productivity improvements are partially due to technological innovation. Furthermore, it is shown how the competition between private and savings banks develops in terms of the analyzed productivity and efficiency components. While private banks enjoy better efficiency change, savings banks contribute more to technological progress. Consequently, the Luenberger components are used as cluster analysis inputs. Thus, economic interpretations of the resulting performance groups are made via key differences in productivity components. Finally, following the strategic groups’ literature, supplementary insights are gained by linking these performance groups with banking ratios. [Copyright &y& Elsevier]
ISSN:03772217
DOI:10.1016/j.ejor.2011.01.041