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Clicks business of deposit-taking institutions: an efficiency analysis

Author

Listed:
  • Farkhanda Shamim
  • Nobuyoshi Yamori
  • Shahid Anjum

Abstract

Purpose - The purpose of this paper is to empirically examine the direct and indirect effects of automated teller machines (ATMs) on the performance and scope economies of the Japanese financial institutions. Design/methodology/approach - Stochastic frontier approach is adopted to estimate banks’ cost and profit efficiency indices and to examine the relationship between inefficiency scores and the number of ATMs. Findings - The study concludes that the banks not only minimize costs and save money by using ATMs, but also spend the saved funds on hiring highly skilled staff to introduce a better product mix which allows the banks to observe scope economies. Originality/value - The findings suggest that although branches would remain a crucial interaction point for relationship banking, but given their high fixed cost, shifting routine banking transactions from the branch to low-cost electronic channels can significantly reduce costs and enhance efficiency of the financial institutions.

Suggested Citation

  • Farkhanda Shamim & Nobuyoshi Yamori & Shahid Anjum, 2017. "Clicks business of deposit-taking institutions: an efficiency analysis," Journal of Economic Studies, Emerald Group Publishing, vol. 44(6), pages 911-930, November.
  • Handle: RePEc:eme:jespps:jes-01-2017-0003
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    References listed on IDEAS

    as
    1. Athanasoglou, Panayiotis P. & Brissimis, Sophocles N. & Delis, Matthaios D., 2008. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 121-136, April.
    2. Per Andersen & Niels Christian Petersen, 1993. "A Procedure for Ranking Efficient Units in Data Envelopment Analysis," Management Science, INFORMS, vol. 39(10), pages 1261-1264, October.
    3. Barros, Carlos Pestana & Ferreira, Candida & Williams, Jonathan, 2007. "Analysing the determinants of performance of best and worst European banks: A mixed logit approach," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 2189-2203, July.
    4. George Assaf, A. & Barros, Carlos P. & Matousek, Roman, 2011. "Productivity and efficiency analysis of Shinkin banks: Evidence from bootstrap and Bayesian approaches," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 331-342, February.
    5. Albertazzi, Ugo & Gambacorta, Leonardo, 2009. "Bank profitability and the business cycle," Journal of Financial Stability, Elsevier, vol. 5(4), pages 393-409, December.
    6. Aly, Hassan Y, et al, 1990. "Technical, Scale, and Allocative Efficiencies in U.S. Banking: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 211-218, May.
    7. repec:eme:jespps:jes-07-2015-0128 is not listed on IDEAS
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