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Efficiency, Profitability and Quality of Banking Services

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  • Stavros Zenios
  • Andreas Soteriou

Abstract

This paper develops a general framework for combining strategic benchmarking with efficiency benchmarking of the services offered by bank branches. In particular, the service-profit chain is cast as a cascade of efficiency benchmarking models. Three models-based on Data Envelopment Analysis (DEA)-are developed in order to implement the framework in the practical setting of a bank's branches: an operational efficiency mode, a quality efficiency model and a profitability efficiency model. The use of the models is illustrated using data for the branches of a commercial Bank. Empirical results indicate that superior insights can be obtained by analyzing operations, service quality, and profitability simultaneously than the information obtained from benchmarking studies of these three dimensions separately. Some relations between operational efficiency and profitability, and between operational efficiency and service quality are investigated. This paper was presented at the Financial Institutions Center's conference on Performance of Financial Institutions, May 8-10, 1997.

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  • Stavros Zenios & Andreas Soteriou, "undated". "Efficiency, Profitability and Quality of Banking Services," Center for Financial Institutions Working Papers 97-28, Wharton School Center for Financial Institutions, University of Pennsylvania.
    • Handle: RePEc:wop:pennin:97-28
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    File URL: http://fic.wharton.upenn.edu/fic/papers/97/zenios.pdf
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    References listed on IDEAS

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    1. Antreas D. Athanassopoulos & Andreas Soteriou & Stavros Zenios, 1997. "Disentangling Within- and Between-Country Efficiency Differences of Bank Branches," Center for Financial Institutions Working Papers 97-17, Wharton School Center for Financial Institutions, University of Pennsylvania.
    2. 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.
    3. Berger, Allen N. & Mester, Loretta J., 1997. "Inside the black box: What explains differences in the efficiencies of financial institutions?," Journal of Banking & Finance, Elsevier, vol. 21(7), pages 895-947, July.
    4. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
    5. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    6. A. Charnes & W. W. Cooper & E. Rhodes, 1981. "Evaluating Program and Managerial Efficiency: An Application of Data Envelopment Analysis to Program Follow Through," Management Science, INFORMS, vol. 27(6), pages 668-697, June.
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    Cited by:

    1. Said Jaouadi & Ilhem Zorgui, 2014. "Exploring Effectiveness and Efficiency of Banks in Switzerland," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(4), pages 313-325, April.
    2. BARBULLUSHI, Erjola, 2022. "Empirical Research On Bank Performance Evaluation Albanian Banking System," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 10(1), pages 99-107, October.
    3. Dr. Nader Alber, 2011. "The Effect Of Banking Expansion On Profit Efficiency Of Saudi Arabia Commercial Banks," Journal of Global Business and Economics, Global Research Agency, vol. 3(1), pages 11-23, July.

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