IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Effects of Financial Capital on Colombian Banking Efficiency

Author Info

  • Dairo Estrada

    ()

  • Poldy Osorio

    ()

Abstract

In this paper we discuss cost and profit efficiency for a sample of financial institutions on the Colombian financial market in the period 1989-2003, using stochastic frontier efficiency analysis. During the period, the cost efficient frontier deteriorates, but profit efficient frontier is relatively stable. We found significant difference when we compare the efficiency scores between types of financial intermediaries. Additionally, our analysis show that the scores for profit and cost efficiency have different distribution. We found big differences between profit and cost efficiency among the different type banks. This is evidence in favor of some banks behaving collusively and capturing oligopoly rents.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.banrep.gov.co/docum/ftp/borra292.pdf
Download Restriction: no

Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 292.

as
in new window

Length:
Date of creation:
Date of revision:
Handle: RePEc:bdr:borrec:292
Contact details of provider: Postal:
Cra 7 # 14-78 Semi-sótano

Phone: (57-1) 3431111
Fax: (57-1) 2841686
Web page: http://www.banrep.gov.co/es/publicaciones-buscador/23
Email:


More information through EDIRC

Keywords: Frontier; Effficiency; Cost; Profit; Financial Capital;

Other versions of this item:

Find related papers by JEL classification:
  • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
  • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
  • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Berger, Allen N. & Humphrey, David B., 1991. "The dominance of inefficiencies over scale and product mix economies in banking," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 117-148, August.
  2. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, December.
  3. Rodrigo Suescún M. & Martha Misas, . "Cambio Tecnológico, Ineficiencia de Escala e Ineficiencia X en la Banca Colombiana," Borradores de Economia 059, Banco de la Republica de Colombia.
  4. Hernando Zuleta G., 1995. "Impuesto Inflacionario Y Señoreaje," BORRADORES DE ECONOMIA 002819, BANCO DE LA REPÚBLICA.
  5. Greene, William H., 1980. "On the estimation of a flexible frontier production model," Journal of Econometrics, Elsevier, vol. 13(1), pages 101-115, May.
  6. Grifell-Tatje, E. & Lovell, C. A. K., 1996. "Deregulation and productivity decline: The case of Spanish bavings banks," European Economic Review, Elsevier, vol. 40(6), pages 1281-1303, June.
  7. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-44, June.
  8. Fare,Rolf & Grosskopf,Shawna & Lovell,C. A. Knox, 2008. "Production Frontiers," Cambridge Books, Cambridge University Press, number 9780521072069, November.
  9. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
  10. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
  11. Avkiran, Necmi Kemal, 1999. "The evidence on efficiency gains: The role of mergers and the benefits to the public," Journal of Banking & Finance, Elsevier, vol. 23(7), pages 991-1013, July.
  12. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  13. Easterly, William & Mauro, Paolo & Schmidt-Hebbel, Klaus, 1992. "Money demand and seignorage - maximizing inflation," Policy Research Working Paper Series 1049, The World Bank.
  14. Friedman, Milton, 1971. "Government Revenue from Inflation," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 846-56, July-Aug..
  15. Allen N. Berger & David B. Humphrey, 1997. "Efficiency of financial institutions: international survey and directions for future research," Finance and Economics Discussion Series 1997-11, Board of Governors of the Federal Reserve System (U.S.).
  16. Altunbas, Yener & Molyneux, Philip & Thornton, John, 1997. "Big-Bank Mergers in Europe: An Analysis of the Cost Implications," Economica, London School of Economics and Political Science, vol. 64(254), pages 317-29, May.
  17. Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October.
  18. Martha López, 2000. "Seigniorage And The Welfare Cost Of Inflation In Colombia," BORRADORES DE ECONOMIA 003488, BANCO DE LA REPÚBLICA.
  19. Waldman, Donald M., 1984. "Properties of technical efficiency estimators in the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 25(3), pages 353-364, July.
  20. Altunbas, Y. & Chakravarty, S. P., 1998. "Efficiency measures and the banking structure in Europe," Economics Letters, Elsevier, vol. 60(2), pages 205-208, August.
  21. Joseph P. Hughes & Loretta J. Mester & Choon-Geol Moon, 2000. "Are Scale Economies in Banking Elusive or Illusive?," Departmental Working Papers 200004, Rutgers University, Department of Economics.
  22. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-48, September.
  23. Günter Lang, Peter Welzel, 1999. "Mergers Among German Cooperative Banks. A Panel-based Stochastic Frontier Analysis," Working Paper Series B 1999-03, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät.
  24. Berger, Allen N. & Mester, Loretta J., 1997. "Inside the black box: What explains differences in the efficiencies of financial institutions?," Journal of Banking & Finance, Elsevier, vol. 21(7), pages 895-947, July.
  25. Carlos Esteban Posada, . "Señoraje, Impuesto Inflacionario y Utilidades (Brutas) del Emisor:Definiciones y Medidas del Caso Colombiano Reciente," Borradores de Economia 140, Banco de la Republica de Colombia.
  26. Joseph P. Hughes, 1997. "Bank Capitalization and Cost: Evidence of Scale Economies in Risk Management and Signaling," Departmental Working Papers 199601, Rutgers University, Department of Economics.
  27. Natalia Salazar, 1992. "El efecto Tanzi, la sustitución de monedas y la tasa de inflación óptima en Colombia," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 11(22), pages 83-108, December.
  28. Berger, Allen N. & Hancock, Diana & Humphrey, David B., 1993. "Bank efficiency derived from the profit function," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 317-347, April.
  29. Martha López P., 2001. "Seigniorage and the Welfare Cost of Inflation in Colombia," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 19(39), pages 115-131, Junio.
  30. Grosskopf, S, 1986. "The Role of the Reference Technology in Measuring Productive Efficiency," Economic Journal, Royal Economic Society, vol. 96(382), pages 499-513, June.
  31. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, vol. 13(1), pages 5-25, May.
  32. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
  33. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  34. Ferrier, Gary D. & Lovell, C. A. Knox, 1990. "Measuring cost efficiency in banking : Econometric and linear programming evidence," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 229-245.
  35. Joseph P. Hughes & Loretta J. Mester, 1993. "Accounting for the demand for financial capital and risk-taking in bank cost functions," Working Papers 93-17, Federal Reserve Bank of Philadelphia.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as in new window


Cited by:

  1. Javier E. Pirateque & José H. Piñeros & Linda Mondragón, 2013. "Eficiencia de los establecimientos bancarios (EB): una aproximación mediante modelos DEA," Borradores de Economia 798, Banco de la Republica de Colombia.
  2. Dairo Estrada & Angela González Arbeláez & Javier Gutierréz Rueda, 2008. "The Effects of Diversification on Banks´ Expected Returns," BORRADORES DE ECONOMIA 004991, BANCO DE LA REPÚBLICA.
  3. Jorge David Quinteo Otero & William Orlando Prieto Bustos & Fernando Barrios Aguirre & Laura Elena Leviller Guardo, 2008. "Determinantes de la eficiencia técnica en las empresas colombianas, 2001-2004," REVISTA SEMESTRE ECONÓMICO, UNIVERSIDAD DE MEDELLÍN, November.
  4. Carlos Andrés Amaya G., 2005. "Interest Rate Setting And The Colombian Monetary Transmission Mechanism," BORRADORES DE ECONOMIA 002910, BANCO DE LA REPÚBLICA.
  5. Carlos Andrés Amaya, . "Interest Rate Setting and the Colombian Monetary Transmission Mechanism," Borradores de Economia 352, Banco de la Republica de Colombia.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:bdr:borrec:292. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Clorith Angélica Bahos Olivera)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.