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Handling losses in translog profit models

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  • Bos, J.W.B.
  • Koetter, M.

    (Groningen University)

Abstract

Abstract In this paper, we compare standard approaches used to handle losses in logarithmic stochastic profit frontier models with a simple novel approach. We discuss discriminatory power, rank stability and precision of profit efficiency scores. Our new method enhances rank stability and discriminatory power, and improves the precision of profit efficiency scores

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File URL: http://irs.ub.rug.nl/ppn/301931399
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Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 07001.

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Date of creation: 2007
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Handle: RePEc:dgr:rugsom:07001

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  1. Bauer, Paul W. & Berger, Allen N. & Ferrier, Gary D. & Humphrey, David B., 1998. "Consistency Conditions for Regulatory Analysis of Financial Institutions: A Comparison of Frontier Efficiency Methods," Journal of Economics and Business, Elsevier, Elsevier, vol. 50(2), pages 85-114, March.
  2. Rolf Fare & Shawna Grosskopf & William Weber, 2004. "The effect of risk-based capital requirements on profit efficiency in banking," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(15), pages 1731-1743.
  3. Francisco Pérez García & Javier Quesada Ibañez & Joaquín Maudos Villarroya & José Manuel Pastor Monsálvez, 1999. "- Cost And Profit Efficiency In European Banks," Working Papers. Serie EC, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 1999-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  4. Vander Vennet, Rudi, 2002. "Cost and Profit Efficiency of Financial Conglomerates and Universal Banks in Europe," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 34(1), pages 254-82, February.
  5. Allen N. Berger & Loretta J. Mester, 1997. "Inside the black box: what explains differences in the efficiencies of financial institutions?," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1997-10, Board of Governors of the Federal Reserve System (U.S.).
  6. Michael Koetter, 2006. "Measurement Matters—Alternative Input Price Proxies for Bank Efficiency Analyses," Journal of Financial Services Research, Springer, Springer, vol. 30(2), pages 199-227, October.
  7. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, Elsevier, vol. 19(2-3), pages 233-238, August.
  8. Humphrey, David B & Pulley, Lawrence B, 1997. "Banks' Responses to Deregulation: Profits, Technology, and Efficiency," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 29(1), pages 73-93, February.
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Cited by:
  1. Tabak, Benjamin M. & Fazio, Dimas M. & Cajueiro, Daniel O., 2012. "The relationship between banking market competition and risk-taking: Do size and capitalization matter?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(12), pages 3366-3381.
  2. Michael Koetter, 2008. "An Assessment of Bank Merger Success in Germany," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 9, pages 232-264, 05.
  3. Hasan, Iftekhar & Koetter, Michael & Wedow, Michael, 2009. "Regional growth and finance in Europe: Is there a quality effect of bank efficiency?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 33(8), pages 1446-1453, August.
  4. J.W.B. Bos & P.C. van Santen & P. Schilp, 2009. "Reallocating profits in restructuring industries: evidence from European and US banking," Working Papers, Utrecht School of Economics 09-12, Utrecht School of Economics.
  5. Park, Kang H., 2009. "Has bank consolidation in Korea lessened competition?," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 49(2), pages 651-667, May.
  6. Bos, J.W.B. & Koetter, M. & Kolari, J.W. & Kool, C.J.M., 2009. "Effects of heterogeneity on bank efficiency scores," European Journal of Operational Research, Elsevier, Elsevier, vol. 195(1), pages 251-261, May.
  7. Benjamin M. Tabak & Dimas M. Fazio & Daniel O. Cajueiro, 2011. "Profit, Cost and Scale Efficiency for Latin American Banks: Concentration-Performance Relationship," Working Papers Series, Central Bank of Brazil, Research Department 244, Central Bank of Brazil, Research Department.
  8. Gaganis, Chrysovalantis & Pasiouras, Fotios, 2013. "Financial supervision regimes and bank efficiency: International evidence," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(12), pages 5463-5475.
  9. Williams, Jonathan, 2012. "Efficiency and market power in Latin American banking," Journal of Financial Stability, Elsevier, Elsevier, vol. 8(4), pages 263-276.
  10. Timothy King & Jonathan Williams, 2013. "Bank Efficiency and Executive Compensation," Working Papers 13009, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).

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