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

Author

Listed:
  • Alfredo Martín-Oliver

    () (Universidad de Zaragoza)

  • Vicente Salas-Fumas

    () (Banco de España)

Abstract

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.

Suggested Citation

  • Alfredo Martín-Oliver & Vicente Salas-Fumas, 2007. "The output and profit contribution of information technology and advertising investments in banks," Working Papers 0740, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:0740
    as

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    References listed on IDEAS

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    Cited by:

    1. Koetter, Michael & Noth, Felix, 2013. "IT use, productivity, and market power in banking," Journal of Financial Stability, Elsevier, vol. 9(4), pages 695-704.
    2. Buch, Claudia M. & Koch, Cathérine Tahmee & Koetter, Michael, 2009. "Margins of international banking: is there a productivity pecking order in banking, too?," Discussion Paper Series 2: Banking and Financial Studies 2009,12, Deutsche Bundesbank.

    More about this item

    Keywords

    IT capital; advertising; output growth; rate of return; banks;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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