Advanced Search
MyIDEAS: Login to save this article or follow this journal

A note on technical change in banking: the case of European savings banks

Contents:

Author Info

  • S. Carbo
  • E. P. M. Gardener
  • J. Williams

Abstract

Using a Fourier flexible form cost function methodology, technical progress is estimated for a large sample of European savings banks between 1989 and 1997. On average, technical progress has reduced savings banks total costs by around 3.4% per annum. Since the European savings banks industry is characterized by technology sharing arrangements, a test is made to determine whether technical change is positively related to bank size. The estimates identify two important features of how technical progress has effected European savings banks' costs. First, costs reductions arising from technical change diminish between 1989 and 1997. Second, technical progress has a bigger impact on reducing large savings banks' costs, chiefly because of its influence on input prices, that is, non-neutral technical change increases systematically with size. This suggests that large savings banks have greater flexibility in reducing costs in response to technical progress, implying that technology sharing arrangements have not led to uniform reductions in banks' total cost. Rather, large savings banks are market leaders and small banks market followers. Since larger banks benefit more from technical progress this may be an important factor promoting consolidation in the European savings banks industry.

Download Info

If 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.
File URL: http://www.tandfonline.com/doi/abs/10.1080/0003684022000035836
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 35 (2003)
Issue (Month): 6 ()
Pages: 705-719

as in new window
Handle: RePEc:taf:applec:v:35:y:2003:i:6:p:705-719

Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20

Order Information:
Web: http://www.tandfonline.com/pricing/journal/RAEC20

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Allen N. Berger & Loretta J. Mester, 1997. "Inside the black box: what explains differences in the efficiencies of financial institutions?," Working Papers 97-1, Federal Reserve Bank of Philadelphia.
  2. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1990. "Production frontiers with cross-sectional and time-series variation in efficiency levels," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 185-200.
  3. Lang, Gunter & Welzel, Peter, 1996. "Efficiency and technical progress in banking Empirical results for a panel of German cooperative banks," Journal of Banking & Finance, Elsevier, vol. 20(6), pages 1003-1023, July.
  4. Gallant, A. Ronald, 1981. "On the bias in flexible functional forms and an essentially unbiased form : The fourier flexible form," Journal of Econometrics, Elsevier, vol. 15(2), pages 211-245, February.
  5. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  6. Elbadawi, Ibrahim & Gallant, A Ronald & Souza, Geraldo, 1983. "An Elasticity Can Be Estimated Consistently without A Priori Knowledge of Functional Form," Econometrica, Econometric Society, vol. 51(6), pages 1731-51, November.
  7. Altunbas, Yener & Goddard, John & Molyneux, Phil, 1999. "Technical change in banking," Economics Letters, Elsevier, vol. 64(2), pages 215-221, August.
  8. William R. White, 1998. "The coming transformation of continental european banking?," BIS Working Papers 54, Bank for International Settlements.
  9. Gallant, A. Ronald, 1982. "Unbiased determination of production technologies," Journal of Econometrics, Elsevier, vol. 20(2), pages 285-323, November.
  10. Gallant, A. Ronald & Souza, Geraldo, 1991. "On the asymptotic normality of Fourier flexible form estimates," Journal of Econometrics, Elsevier, vol. 50(3), pages 329-353, December.
  11. De Bandt, Olivier & Davis, E. Philip, 2000. "Competition, contestability and market structure in European banking sectors on the eve of EMU," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 1045-1066, June.
  12. Mester, Loretta J., 1996. "A study of bank efficiency taking into account risk-preferences," Journal of Banking & Finance, Elsevier, vol. 20(6), pages 1025-1045, July.
  13. Kenneth Spong & Richard J. Sullivan & Robert DeYoung, 1995. "What makes a bank efficient? : a look at financial characteristics and management and ownership structure," Financial Industry Perspectives, Federal Reserve Bank of Kansas City, issue Dec, pages 1-19.
  14. Hunter, William C & Timme, Stephen G, 1991. "Technological Change in Large U.S. Commercial Banks," The Journal of Business, University of Chicago Press, vol. 64(3), pages 339-62, July.
  15. Chalfant, James A. & Gallant, A. Ronald, 1985. "Estimating substitution elasticities with the Fourier cost function : Some Monte Carlo results," Journal of Econometrics, Elsevier, vol. 28(2), pages 205-222, May.
  16. McKillop, Donal G. & Glass, J. Colin & Morikawa, Yukio, 1996. "The composite cost function and efficiency in giant Japanese banks," Journal of Banking & Finance, Elsevier, vol. 20(10), pages 1651-1671, December.
  17. Baltagi, Badi H & Griffin, James M, 1988. "A General Index of Technical Change," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 20-41, February.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Paul Schure & Dermot O'Brien & Rien Wagenvoort, 2002. "The Efficiency and the Conduct of European Banks: Developments after 1992," EUI-RSCAS Working Papers 60, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  2. Barbara Casu & Philip Molyneux, 2000. "A Comparative Study of Efficiency in European Banking," Center for Financial Institutions Working Papers 00-17, Wharton School Center for Financial Institutions, University of Pennsylvania.
  3. Williams, Jonathan & Nguyen, Nghia, 2005. "Financial liberalisation, crisis, and restructuring: A comparative study of bank performance and bank governance in South East Asia," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2119-2154, August.
  4. Fitzpatrick, Trevor & McQuinn, Kieran, 2004. "Cost Efficiency in UK and Irish Credit Institutions," Research Technical Papers 3/RT/04, Central Bank of Ireland.
  5. Adnan Kasman & Saadet Kirbas-Kasman, 2006. "Technical Change in Banking: Evidence From Transition Countries," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(1), pages 129-144.
  6. Mariani Abdul-Majid & David Saal & Giuliana Battisti, 2010. "Efficiency in Islamic and conventional banking: an international comparison," Journal of Productivity Analysis, Springer, vol. 34(1), pages 25-43, August.
  7. Trevor Fitzpatrick & Kieran McQuinn, 2005. "Labour Cost Efficiency in UK and Irish Credit Institutions," The Economic and Social Review, Economic and Social Studies, vol. 36(1), pages 45–66.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:35:y:2003:i:6:p:705-719. See general 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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.