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Optimal capacity utilization and reallocation in a German bank branch network: Exploring some strategic scenarios


  • Kerstens, Kristiaan

    () (CNRS-LEM (UMR 8179), IESEG School of Management, Lille, France)

  • Bouye, Ahmed Moulaye Hachem

    () (CNRS-LEM (UMR 8179), IESEG School of Management, Lille, France)

  • Van de Woestyne, Ignace

    () (Hogeschool-Universiteit Brussel (HUB), Belgium)

  • Vestergaard, Niels

    () (Department of Environmental and Business Economics, Centre of Fisheries and Aquaculture Management and Economics, University of Southern Denmark, Esbjerg, Denmark.)


Quite a few studies have considered efficiency at the bank branch level by comparing mostly a single branch network, while an abundance of studies have focused on comparing banking institutions. However, to the best of our knowledge no study has ever assessed performance at the level of the branch bank network by looking for ways to reallocate resources such that overall performance improves. Here, we introduce the Johansen-Färe measure of plant capacity of the firm into a multi-output, frontier-based version of the short-run Johansen industry model. The first stage capacity model carefully checks for the impact of the convexity assumption on the estimated capacity utilization results. Policy scenarios considered for the short-run Johansen industry model vary in terms of their tolerance with respect to existing bank branch inefficiencies, the formulation of closure policies, the reallocation of labor in terms of integer units, etc. The application to a network of 142 bank branches of a German savings bank in the year 1998 measures their efficiency and capacity utilization and demonstrate that by this industry model approach one can improve the performance of the whole branch network.

Suggested Citation

  • Kerstens, Kristiaan & Bouye, Ahmed Moulaye Hachem & Van de Woestyne, Ignace & Vestergaard, Niels, 2008. "Optimal capacity utilization and reallocation in a German bank branch network: Exploring some strategic scenarios," Working Papers 2008/59, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  • Handle: RePEc:hub:wpecon:200859

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    References listed on IDEAS

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    Cited by:

    1. Subhash C. Ray, 2014. "Branching Efficiency in Indian Banking: An Analysis of a Demand-Constrained Network," Working papers 2014-34, University of Connecticut, Department of Economics.
    2. Ray, Subhash, 2016. "Cost efficiency in an Indian bank branch network: A centralized resource allocation model," Omega, Elsevier, vol. 65(C), pages 69-81.

    More about this item


    Bank Branch Network; Efficiency; Capacity; Reallocation;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management


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