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The output and profit contribution of information technology and advertising investments in banks

  • Alfredo Martín-Oliver

    ()

    (Universidad de Zaragoza)

  • Vicente Salas-Fumas

    ()

    (Banco de España)

This paper examines the contribution of investments in Information Technology (IT) and in advertising to the output and profits of Spanish banks, in the period 1983-2003. We find that the growth in the stock of IT capital explains one third of output growth of banks, and that an additional investment in IT of one million euros may be substituted for twenty-five workers. The paper also finds that advertising investments increase the demand for bank services with an elasticity of 0.22 for deposits and 0.11 for loans. For all the assets considered, the null hypothesis that banks use the profit-maximizing amount of services per period cannot be rejected with the data.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/07/Fic/dt0740e.pdf
File Function: First version, January 2008
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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0740.

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Length: 39 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:bde:wpaper:0740
Contact details of provider: Web page: http://www.bde.es/
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