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Bank productivity and performance groups: A decomposition approach based upon the Luenberger productivity indicator

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  • Epure, Mircea
  • Kerstens, Kristiaan
  • Prior, Diego

Abstract

The purpose of this paper is twofold. First, in the framework of the strategic groups' literature, it analyZes changes in productivity and efficiency of Spanish private and savings banks over an eight-year period (1998-2006). Second, by adapting the decomposition of the Malmquist productivity indices suggested by Färe et al. (1994), it proposes similar components decomposing the Luenberger productivity indicator. Initially, productivity is decomposed into technological and efficiency changes. Thereafter, this efficiency change is decomposed into pure efficiency, scale and congestion changes. Empirical results demonstrate that productivity improvements are partially due to technological innovation. Furthermore, it is shown how the competition between private and savings banks develops in terms of the analyzed productivity and efficiency components. While private banks enjoy better efficiency change, savings banks contribute more to technological progress. Consequently, the Luenberger components are used as cluster analysis inputs. Thus, economic interpretations of the resulting performance groups are made via key differences in productivity components. Finally, following the strategic groups' literature, supplementary insights are gained by linking these performance groups with banking ratios.

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  • Epure, Mircea & Kerstens, Kristiaan & Prior, Diego, 2011. "Bank productivity and performance groups: A decomposition approach based upon the Luenberger productivity indicator," European Journal of Operational Research, Elsevier, vol. 211(3), pages 630-641, June.
  • Handle: RePEc:eee:ejores:v:211:y:2011:i:3:p:630-641
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    Cited by:

    1. E. Avisoa, 2016. "European banks’ technical efficiency and performance: do business models matter? The case of European co-operatives banks," Débats économiques et financiers 25, Banque de France.
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    5. repec:spr:waterr:v:31:y:2017:i:8:d:10.1007_s11269-016-1395-6 is not listed on IDEAS
    6. Frederic Ang & Pieter Jan Kerstens, 2018. "Superlative approximation of the Luenberger-Hicks-Moorsteen productivity indicator: Theory and application," IFRO Working Paper 2018/10, University of Copenhagen, Department of Food and Resource Economics.
    7. repec:spr:annopr:v:253:y:2017:i:1:d:10.1007_s10479-016-2348-4 is not listed on IDEAS
    8. Casu, Barbara & Ferrari, Alessandra & Girardone, Claudia & Wilson, John O.S., 2016. "Integration, productivity and technological spillovers: Evidence for eurozone banking industries," European Journal of Operational Research, Elsevier, vol. 255(3), pages 971-983.
    9. Molinos-Senante, María & Maziotis, Alexandros & Sala-Garrido, Ramón, 2014. "The Luenberger productivity indicator in the water industry: An empirical analysis for England and Wales," Utilities Policy, Elsevier, vol. 30(C), pages 18-28.
    10. Ang, Frederic & Kerstens, Pieter Jan, 2017. "Decomposing the Luenberger–Hicks–Moorsteen Total Factor Productivity indicator: An application to U.S. agriculture," European Journal of Operational Research, Elsevier, vol. 260(1), pages 359-375.
    11. Tzeremes, Nickolaos G., 2015. "Efficiency dynamics in Indian banking: A conditional directional distance approach," European Journal of Operational Research, Elsevier, vol. 240(3), pages 807-818.
    12. repec:eee:eneeco:v:68:y:2017:i:c:p:303-312 is not listed on IDEAS
    13. Lansink, Alfons Oude & Stefanou, Spiro & Serra, Teresa, 2015. "Primal and dual dynamic Luenberger productivity indicators," European Journal of Operational Research, Elsevier, vol. 241(2), pages 555-563.
    14. Ancev, Tiho & Azad, Samad Md., 2015. "Environmentally Adjusted Productivity and Efficiency Measurement: A New Direction for the Luenberger Productivity Indicator," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 204912, Agricultural and Applied Economics Association.
    15. Wanke, Peter & Barros, Carlos P. & Faria, João R., 2015. "Financial distress drivers in Brazilian banks: A dynamic slacks approach," European Journal of Operational Research, Elsevier, vol. 240(1), pages 258-268.
    16. Peter Wanke & Carlos Barros & Nkanga Pedro João Macanda, 2016. "Predicting Efficiency in Angolan Banks: A Two-Stage TOPSIS and Neural Networks Approach," South African Journal of Economics, Economic Society of South Africa, vol. 84(3), pages 461-483, September.

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