Athanasios G. Noulas

The technical efficiency of large bank production

Abstract Significant difficulties in commercial banking in the late 1980s raise questions about bank performance and efficiency. With the use of data envelopment analysis (DEA), we consider the relative technical efficiency of 201 large banks from 1984 to 1990. Bank technical inefficiency averages just over 5 percent, much lower than found in existing estimates. Larger and more profitable banks have higher levels of technical efficiency. At the same time, however, larger banks are more likely to operate under decreasing returns to scale.

Portfolio mix and large-bank profitability in the USA

The US banking system has just emerged from a troublesome period with many institutions struggling for survival. We examine large commercial banks during the latter part of the 1980s to determine what factors affected bank profitability, using both cross-section and pooled time-series cross-section regressions. Our conclusions are that large banks experienced poor performance because of a declining quality of the loan portfolio. Real estate loans generally have a negative effect on large bank profitability, although not at high levels of significance; construction and land development loans, the exception, have a strong positive effect.

Short-Run Cost Inefficiency of Commercial Banks: A Flexible Stochastic Frontier Approach

We adopt the intermediation approach, and use a flexible stochastic frontier to examine the cost efficiency of United States commercial banks with total assets in excess of & Million. We find an average overall inefficiency of just under 10 percent, a level somewhat lower than found in previous work. Our analysis of intra-industry variation concludes that inefficiency generally rises with bank size. Further, banks that have branching networks, either domestic or foreign, have higher inefficiency, on average; but, at the same time, inefficiency falls as the number of offices in the branch network expands. State level data on the ease of serviceing the market, competition from savings institutions, and the financial sophistication of depositors significantly affect bank inefficiency, generally with the expected signs. Finally, our findings suggest that regulatory changes that increase capital requirements may lead to increased bank efficiency in the short run. Copyright 1994 by Ohio State University Press.

Returns to Scale and Input Substitution for Large U.S. Banks

THE UNITED STATES COMMERCIAL BANKING INDUSTRY has experienced significant changes in recent years. The recent wave of mergers and the near-term prospects of interstate banking suggests that the industry is moving toward much larger average banking organizations (Rhoades 1985). Will a more concentrated banking industry result in lower costs due to scale economies? We address this question by examining the cost function for large banks. Numerous studies of economies of scale in banking exist, generally tracing their roots to the classic papers by Benston ( 1965) and Bell and Murphy ( 1968). A good review of the most recent studies can be found in Clark ( 1988). The majority of the papers uses samples of smaller banks (that is, under

Deregulation and operating efficiency: the case of the Greek banks

1 billion in deposits), finding generally that economies of scale are quickly exhausted and that further increases in bank size occur at constant, or possibly increasing, cost. The extrapolation of previous findings for samples of smaller banks to large banks may be problematic, especially in the current environment. First, large banks service a different mix of markets and customers than small banks, suggesting that large and small banks probably face different cost structures. Second, the process of deregulation may have rendered the results of prior studies moot, since the data pertain to periods before significant deregulation. Since we

The determinants of capital structure choice: evidence from Greek listed companies

Outlines the deregulation of banking in Greece and previous research on measuring banking efficiency. Uses 1993‐1998 data to assess the effects of deregulation on both private and state‐controlled banks. Shows that the state banks were less efficient than the private and that the gap widened during the period for both non‐interest and labour expenses as a proportion of operating income, as the private banks increased their efficiency. Finds the relative efficiency measured by data envelopment analysis supports the greater efficiency of private banks although the difference is only significant at the 5 per cent level for 1996. Compares the four most efficient banks and briefly considers the underlying reasons for the findings.

Investigating cost efficiency in the branch network of a Greek bank: an empirical study

This article investigates the capital structure determination of firms listed on the Athens Stock Exchange, using both cross-sectional and nonparametric statistics. The data set is mainly composed of balance sheet data for 259 firms over a 9-year period from 1998 to 2006, excluding firms from the banking, finance, real estate and insurance sectors. The first part of the study assesses the extent to which leverage depends upon a broader set of capital structure determinants, while the latter provides evidence that capital structure varies significantly across a series of firm classifications. The results document empirical regularities with respect to alternative measures of debt that are consistent with existing theories and, in particular, reasonably support the pecking order hypothesis. Overall, this study tries to shed more light on corporate financing behaviour in a way to loosen the capital structure puzzle.

Regularity conditions and scope estimates: The case of large-sized U.S. banks

Purpose - The purpose of this study is to examine the cost efficiency of 58 branches of a major Greek commercial bank, in six major Greek cities, for the years 2000 and 2001. Design/methodology/approach - The efficiency is measured through the data envelopment analysis (DEA) method. Using regression analysis, the effect of size on cost efficiency is also examined. Findings - The results indicate that there is a room for substantial efficiency improvements. The average inefficiency is about 30 per cent. It has also been observed that rural branches tend, on average, to be more efficient than urban branches. Research limitations/implications - A direction of future research would be to extend the analysis of determinants of bank branch efficiency in order to investigate the role that the region and the characteristics of the branch play in relation to efficiency. Originality/value - The paper provides a comparative evaluation of the efficiency of 58 branches of a major Greek commercial bank using the DEA method.

Inflation uncertainty and capital structure: Evidence from a pooled sample of the Dow-Jones industrial firms

We consider economies and diseconomies of scope for large U.S. banks by employing ordinary and hybrid translog cost functions. We examine the regularity conditions in output space where scope estimates are calculated and reject all models for which these conditions fail. The translog model always possesses violations. For the hybrid translog, violations occur in every case except one. In this one case, we find economies of scope.

Efficient utilization of resources in public schools: a case study of New Jersey

Abstract The paper extends the literature on the determinants of capital structure by incorporating inflation uncertainty. By pooling data from the 30 Dow Jones industrial firms for 20 years and by using alternative model assumptions, namely, random effects vs. fixed effects and semilog vs. linear functional form, we find that inflation uncertainty exerts a strong negative effect on a firms debt-to-equity ratio.