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The output and profit contribution of information technology and advertising investments in banks

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  • Martín-Oliver, Alfredo
  • Salas-Fumás, Vicente

Abstract

This paper examines the contribution of investments in Information Technology (IT) and in advertising to the output and profits of Spanish banks, in the period 1983-2003. We find that the growth in the stock of IT capital explains one third of output growth of banks, and that an additional investment in IT of one million euros may be substituted for twenty-five workers. The paper also finds that advertising investments increase the demand for bank services with an elasticity of 0.22 for deposits and 0.11 for loans. For all the assets considered, the null hypothesis that banks use the profit-maximizing amount of services per period cannot be rejected with the data.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Intermediation.

Volume (Year): 17 (2008)
Issue (Month): 2 (April)
Pages: 229-255

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Handle: RePEc:eee:jfinin:v:17:y:2008:i:2:p:229-255

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Web page: http://www.elsevier.com/locate/inca/622875

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Keywords: IT capital Advertising Output growth Rate of return Banks;

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References

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  3. Alfredo Martín-Oliver & Vicente Salas-Fumás & Jesús Saurina, 2007. "Measurement of capital stock and input services of Spanish banks," Banco de Espa�a Working Papers 0711, Banco de Espa�a.
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Cited by:
  1. Buch, Claudia M. & Koch, Cathérine Tahmee & Koetter, Michael, 2009. "Margins of international banking: is there a productivity pecking order in banking, too?," Discussion Paper Series 2: Banking and Financial Studies 2009,12, Deutsche Bundesbank, Research Centre.
  2. Koetter, Michael & Noth, Felix, 2013. "IT use, productivity, and market power in banking," Journal of Financial Stability, Elsevier, vol. 9(4), pages 695-704.

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