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The impact of non-traditional activities on the estimation of bank efficiency: International evidence


Reference:

Lozano-Vivas, A. and Pasiouras, F., 2010. The impact of non-traditional activities on the estimation of bank efficiency: International evidence. Journal of Banking and Finance, 34 (7), pp. 1436-1449.

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Official URL:

http://dx.doi.org/10.1016/j.jbankfin.2010.01.006

Abstract

This paper investigates the relevance of non-traditional activities in the estimation of bank efficiency els using a sample of 752 publicly quoted commercial banks from 87 countries around the world, allowing comparison of the impact of such activities under different levels of economic development, geographical regions and other country characteristics. We estimate both cost and profit efficiency of banks using a traditional function that considers loans and other earnings assets as the only outputs, and two additional functions to account for non-traditional activities, one with off-balance sheet (OBS) items and the other with non-interest income as an additional output. Controlling for cross-country differences in regulatory and environmental conditions, we find that, on average, cost efficiency increases irrespective of whether we use OBS or non-interest income, although the results for profit efficiency are mixed. Our results also reveal that while the inclusion of non-traditional outputs does not alter the directional impact of environmental variables on bank inefficiency, regulations that restrict bank activities and enhance monitoring and supervision provisions improve both cost and profit efficiency.

Details

Item Type Articles
CreatorsLozano-Vivas, A.and Pasiouras, F.
DOI10.1016/j.jbankfin.2010.01.006
Uncontrolled Keywordsoff-balance sheet, regulatory conditions, efficiency, environmental variables, non-traditional activities
DepartmentsSchool of Management
RefereedYes
StatusPublished
ID Code19357
Additional InformationConference on Performance Measurement in the Financial Services Sector. 4-5 July 2008. London. Sp. Iss. SI

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