Performance measures of retail banking networks: a decision support tool
AbstractIn this paper, we apply a standard model of performance evaluation to the retail banking industry. In this framework, the global economic performance is broken down into technical efficiency related to the optimal use of resources and price efficiency related to the optimal choice of a product-mix. Our main contribution is twofold. First we adapt this traditional framework to the retail banking network by giving a relevant interpretation of the efficiency measures at the branch manager and at the regional top management levels. Second, we relate explicitly the product-mix efficiency to the market environment and to the size of branches. We postulate that branches in different environments could face different production technologies and that optimal product-mixes could vary with the size of the branches. We take a sample size of 1585 branches from a single bank brand breaking down in 17 French regions. We use a nonparametric approach to model the production technologies and to identify optimal benchmarks. Our main objective is to end up with a decision support tool for the top bank management in order to plan product-mix strategies and to give the right incentives to branches’ managers. This tool should prove useful since, in retail banking networks, such tools have to be simple, robust, easy to control, and adapted to the vertical organization of the banking network.
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 InfoPaper provided by Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations in its series Working Papers CREGO with number 1071203.
Length: 28 pages
Date of creation: Dec 2007
Date of revision:
Contact details of provider:
Postal: 2 Bd Gabriel, BP 26611, 21066 Dijon Cedex, France
Postal: Angèle Renaud, CREGO, 2 Bd Gabriel, BP 26611, 21066 Dijon Cedex, France
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-26 (All new papers)
- NEP-BAN-2008-01-26 (Banking)
- NEP-EFF-2008-01-26 (Efficiency & Productivity)
- NEP-NET-2008-01-26 (Network Economics)
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.:
- Sherman, H. David & Gold, Franklin, 1985. "Bank branch operating efficiency : Evaluation with Data Envelopment Analysis," Journal of Banking & Finance, Elsevier, vol. 9(2), pages 297-315, June.
- Dopuch, Nicholas & Gupta, Mahendra, 1997. "Estimation of benchmark performance standards: An application to public school expenditures," Journal of Accounting and Economics, Elsevier, vol. 23(2), pages 141-161, July.
- Parkan, Celik, 1987. "Measuring the efficiency of service operations: An application to bank branches," Engineering Costs and Production Economics, Elsevier, vol. 12(1-4), pages 237-242, July.
- Oral, Muhittin & Yolalan, Reha, 1990. "An empirical study on measuring operating efficiency and profitability of bank branches," European Journal of Operational Research, Elsevier, vol. 46(3), pages 282-294, June.
- Denise McEachern & Joseph Paradi, 2007. "Intra- and inter-country bank branch assessment using DEA," Journal of Productivity Analysis, Springer, vol. 27(2), pages 123-136, April.
- Berger, Allen N. & Leusner, John H. & Mingo, John J., 1997.
"The efficiency of bank branches,"
Journal of Monetary Economics,
Elsevier, vol. 40(1), pages 141-162, September.
- Allen N. Berger & John H. Leusner & John Mingo, 1994. "The efficiency of bank branches," Finance and Economics Discussion Series 94-26, Board of Governors of the Federal Reserve System (U.S.).
- Allen Berger & John Leusner & John Mingo, 1994. "The Efficiency of Bank Branches," Center for Financial Institutions Working Papers 94-27, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Hartman, Thomas E. & Storbeck, James E. & Byrnes, Patricia, 2001. "Allocative efficiency in branch banking," European Journal of Operational Research, Elsevier, vol. 134(2), pages 232-242, October.
- Ittner, Christopher D. & Larcker, David F. & Randall, Taylor, 2003. "Performance implications of strategic performance measurement in financial services firms," Accounting, Organizations and Society, Elsevier, vol. 28(7-8), pages 715-741.
- Portela, Maria Conceicao A. Silva & Thanassoulis, Emmanuel, 2007. "Comparative efficiency analysis of Portuguese bank branches," European Journal of Operational Research, Elsevier, vol. 177(2), pages 1275-1288, March.
- John D. C. Little, 1970. "Models and Managers: The Concept of a Decision Calculus," Management Science, INFORMS, vol. 16(8), pages B466-B485, April.
- Camanho, A.S. & Dyson, R.G., 2008. "A generalisation of the Farrell cost efficiency measure applicable to non-fully competitive settings," Omega, Elsevier, vol. 36(1), pages 147-162, February.
- Athanassopoulos, Antreas D, 1998. "Nonparametric Frontier Models for Assessing the Market and Cost Efficiency of Large-Scale Bank Branch Networks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(2), pages 172-92, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Angèle RENAUD).
If references are entirely missing, you can add them using this form.