Determinants of profit efficiency: evidence from Korean savings banks
AbstractThis article shows the profit efficiency and its determinants in Korean savings banks in the period 2002--2008 using a three-step estimation procedure: profit efficiency, computed in the second step after the first step Generalized Method of Moments (GMM) estimation, is regressed on the environmental variables in the third step. We found that industry-average profit efficiency dropped in 2004--2005 and quickly rebound in the subsequent years. We also found that unit banks and small banks are more efficient than affiliated banks and large banks. This article then analyses determinants of profit efficiency and presents three findings: (1) interest rate is the most important factor, with a 1% point increase in interest rate leading to a 20% point increase in profit efficiency; (2) profit efficiency declines as bank assets increase, implying that the expansionary strategy is not profit-enhancing unless current technology for financial intermediation changes; and (3) an increase in noncollateral loans lowers profit efficiency, implying that a policy drive for an increase in noncollateral loans requires a priori appropriate credit rating system and transparent accounting practices.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Financial Economics.
Volume (Year): 22 (2012)
Issue (Month): 12 (June)
Contact details of provider:
Web page: http://www.tandf.co.uk/journals/routledge/09603107.html
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.