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Nonparametric Frontier Models for Assessing the Market and Cost Efficiency of Large-Scale Bank Branch Networks

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  • Athanassopoulos, Antreas D

Abstract

In this paper the author proposes models for assessing the efficiency in large networks of bank branches. He distinguishes bank branch efficiency into market and cost components suitably modified to capture different tiers of bank-management. The paper proposes a methodology which includes the use of multivariate analysis in order to ensure the homogeneity of the branches assessed and then data envelopment analysis for assessing efficiency. The methodology is applied on a sample of 580 branches of a commercial bank in the United Kingdom. The results obtained reinforced previous claims regarding the presence of high technical inefficiencies and economies/diseconomies of scale at the branch level from a production and cost point of view. Furthermore, the decision to precluster the network of branches into homogenous groups has had profound implications on the magnitude of the assessed efficiencies.

Suggested Citation

  • 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 172-192, May.
  • Handle: RePEc:mcb:jmoncb:v:30:y:1998:i:2:p:172-92
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    Cited by:

    1. Aude Hubrecht & Fabienne Guerra, 2005. "Mesure De La Performance Globale Des Agences Bancaires : Une Application De La Méthode Dea," Post-Print halshs-00581212, HAL.
    2. Halme, Merja & Korhonen, Pekka & Eskelinen, Juha, 2014. "Non-convex value efficiency analysis and its application to bank branch sales evaluation," Omega, Elsevier, vol. 48(C), pages 10-18.
    3. Aude Hubrecht & Michel Dietsch & Fabienne Guerra, 2005. "Mesure de la performance des agences bancaires par une approche DEA," Revue Finance Contrôle Stratégie, revues.org, vol. 8(2), pages 131-171, June.
    4. G.S. Donatos & D.I. Giokas, 2008. "Relative Efficiency in the branch network of a Greek bank: A quantitative analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 53-72.
    5. Eskelinen, Juha & Kuosmanen, Timo, 2013. "Intertemporal efficiency analysis of sales teams of a bank: Stochastic semi-nonparametric approach," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5163-5175.
    6. LaPlante, A.E. & Paradi, J.C., 2015. "Evaluation of bank branch growth potential using data envelopment analysis," Omega, Elsevier, vol. 52(C), pages 33-41.
    7. Don U.A. Galagedera, 2004. "A Survey On Investment Performance Appraisal Methods With Special Reference To Data Envelopment Analysis," Finance 0406013, EconWPA.
    8. Botti, Laurent & Briec, Walter & Cliquet, Gérard, 2009. "Plural forms versus franchise and company-owned systems: A DEA approach of hotel chain performance," Omega, Elsevier, vol. 37(3), pages 566-578, June.
    9. Evelyne Poincelot & Dominique Poincelot, 2007. "Les sociétés cotées en France préparent-elles le marché à l’augmentation de leur capital par les rachats de leurs propres actions?Do french quoted firms repurchase stocks in order to prepare the marke," Working Papers CREGO 1071105, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    10. Hodonou DANNON, 2009. "Efficacité et productivité des banques de la zone UEMOA dans un contexte de réformes financières. Une application de la méthode DEA (Banks efficiency and productivity in the WAEMU in a context of fina," Working Papers 216, Laboratoire de Recherche sur l'Industrie et l'Innovation. ULCO / Research Unit on Industry and Innovation.
    11. Andreas Wutz, 2002. "Wie beeinflusst das Umfeld einer Bank die Effizienz? - Eine DEA-Analyse fuer die Bayerischen Genossenschaftsbanken," Discussion Paper Series 215, Universitaet Augsburg, Institute for Economics.
    12. Hirtle, Beverly, 2007. "The impact of network size on bank branch performance," Journal of Banking & Finance, Elsevier, vol. 31(12), pages 3782-3805, December.
    13. Paradi, Joseph C. & Zhu, Haiyan, 2013. "A survey on bank branch efficiency and performance research with data envelopment analysis," Omega, Elsevier, vol. 41(1), pages 61-79.
    14. Fatima S. Al Shamsi & Hassan Aly & Mohamed El-Bassiouni, 2009. "Measuring and explaining the efficiencies of the United Arab Emirates banking system," Applied Economics, Taylor & Francis Journals, vol. 41(27), pages 3505-3519.
    15. Eskelinen, Juha & Halme, Merja & Kallio, Markku, 2014. "Bank branch sales evaluation using extended value efficiency analysis," European Journal of Operational Research, Elsevier, vol. 232(3), pages 654-663.
    16. Aude Hubrecht-Deville & Hervé Leleu, 2007. "Performance measures of retail banking networks: a decision support tool," Working Papers CREGO 1071203, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    17. Aude Deville & Gary D. Ferrier & Hervé Leleu, 2009. "Performance measures for hierarchical organizations: Frontier analysis as a decision support tool," Working Papers 2009-ECO-01, IESEG School of Management.
    18. Lawrence M. Seiford & Joe Zhu, 1999. "Profitability and Marketability of the Top 55 U.S. Commercial Banks," Management Science, INFORMS, vol. 45(9), pages 1270-1288, September.
    19. Aude Hubrecht-Deville, 2007. "Branch banking networks assessment using DEA:A benchmarking analysis," Working Papers CREGO 1071103, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    20. repec:pal:jorsoc:v:56:y:2005:i:5:d:10.1057_palgrave.jors.2601839 is not listed on IDEAS

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