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Optimal Capacity Utilization and Reallocation in a German Bank Branch Network: Exploring Some Strategic Scenarios

  • Kristiaan Kerstens


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

  • Bouye Ahmed Moulaye Hachem


    (LEM-CNRS and IESEG School of Management)

  • Ignace Van de Woestyne

    (Hogeschool Universiteit Brussel, Brussels, Belgium)

  • Niels Vestergaard

    (University of Southern 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.

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Paper provided by IESEG School of Management in its series Working Papers with number 2008-ECO-19.

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Length: 33 pages
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:ies:wpaper:e200819
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  17. Kristiaan Kerstens & Niels Vestergaard & Dale Squires, 2006. "A short-run Johansen industry model for common-pool resources: planning a fishery's industrial capacity to curb overfishing," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 33(3), pages 361-389, September.
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