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Information Technology and Productivity Changes in the Banking Industry

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  • Luca Casolaro
  • Giorgio Gobbi

Abstract

This paper analyses the effects of investment in information technologies (IT) in the financial sector using micro‐data from a panel of 600 Italian banks over the period 1989–2000. Stochastic cost and profit functions are estimated allowing for individual banks’ displacements from the best practice frontier and for non‐neutral technological change. The results show that both cost and profit frontier shifts are strongly correlated with IT capital accumulation. Banks adopting IT capital‐intensive techniques are also more efficient. On the whole, over the past decade IT capital‐deepening contribution to total factor productivity growth of the Italian banking industry can be estimated in a range between 1.3 and 1.8 per cent per year.

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  • Luca Casolaro & Giorgio Gobbi, 2007. "Information Technology and Productivity Changes in the Banking Industry," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 36(1), pages 43-76, February.
    • Handle: RePEc:bla:ecnote:v:36:y:2007:i:1:p:43-76
    DOI: 10.1111/j.1468-0300.2007.00178.x
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    3. Trkman, Peter, 2010. "The critical success factors of business process management," International Journal of Information Management, Elsevier, vol. 30(2), pages 125-134.
    4. Paolo Emilio Mistrulli & Luca Antelmo & Maddalena Galardo & Iconio Garrì & Dario Pellegrino & Davide Revelli & Vito Savino, 2019. "Why do banks close? The geography of branch pruning," Questioni di Economia e Finanza (Occasional Papers) 540, Bank of Italy, Economic Research and International Relations Area.
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    6. Majid Karimzadeh & Mohammad Reza Sasouli, 2013. "Contribution of Internet Banking toward Profitability of Banking in India," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 9(6), pages 57-69, December.
    7. Sauro Mocetti & Marcello Pagnini & Enrico Sette, 2017. "Information Technology and Banking Organization," Journal of Financial Services Research, Springer;Western Finance Association, vol. 51(3), pages 313-338, June.
    8. Maddalena Galardo & Iconio Garrì & Paolo Emilio Mistrulli & Davide Revelli, 2021. "The geography of banking: Evidence from branch closings," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 50(1), February.
    9. Prakash, Navendu & Singh, Shveta & Sharma, Seema, 2021. "Technological diffusion, banking efficiency and Solow's paradox: A frontier-based parametric and non-parametric analysis," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 534-551.
    10. Hussain, Matloub & Papastathopoulos, Avraam, 2022. "Organizational readiness for digital financial innovation and financial resilience," International Journal of Production Economics, Elsevier, vol. 243(C).
    11. Davide Arnaudo & Silvia Del Prete & Cristina Demma & Marco Manile & Andrea Orame & Marcello Pagnini & Carlotta Rossi & Paola Rossi & Giovanni Soggia, 2022. "The Digital Trasformation in the Italian Banking Sector," Questioni di Economia e Finanza (Occasional Papers) 682, Bank of Italy, Economic Research and International Relations Area.
    12. Emilia Bonaccorsi di Patti & Federica Ciocchetta, 2020. "Economies of scale revisited: evidence from Italian banks," Questioni di Economia e Finanza (Occasional Papers) 568, Bank of Italy, Economic Research and International Relations Area.
    13. Scott, Susan V. & Zachariadis, Markos, 2010. "The impact of the diffusion of a financial innovation on company performance: an analysis of SWIFT adoption," LSE Research Online Documents on Economics 48906, London School of Economics and Political Science, LSE Library.
    14. Francesca Pampurini & Anna Grazia Quaranta, 2024. "Assessing the Impact of Banks’ High-Tech Investments on Efficiency: What Is the Actual Relationship Direction?," International Journal of Business and Management, Canadian Center of Science and Education, vol. 18(6), pages 1-13, January.
    15. Qiao Guangshun, 2023. "Survival of the Fittest: The Long-run Productivity Analysis of the Listed Information Technology Companies in the US Stock Market," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 17(1), pages 1-11, January.
    16. Lucia Dalla Pellegrina & Serena Frazzoni & Zeno Rotondi & Andrea Vezzulli, 2017. "Does ICT adoption improve access to credit for small enterprises?," Small Business Economics, Springer, vol. 48(3), pages 657-679, March.
    17. Nurwahida Fuad, 2013. "Knowledge Based Information System for Strengthening the Competitive Advantages of Women Technopreneurs in Malaysia," Information Management and Business Review, AMH International, vol. 5(5), pages 225-232.
    18. Agu, Chinonso .V. & Aguegboh, Ekene .S., 2020. "ICT and Bank Performance in Sub-Saharan Africa: A Dynamic Panel Analysis," MPRA Paper 100355, University Library of Munich, Germany.

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