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Article
Publication date: 1 January 1997

William C. Hunter and Stephen G. Timme

This paper provides novel empirical evidence on the impact of bank internal organization structure characteristics on costs and productive efficiency. The specific internal…

189

Abstract

This paper provides novel empirical evidence on the impact of bank internal organization structure characteristics on costs and productive efficiency. The specific internal organization characteristics examined include centralized versus decentralized 1) decision‐making, 2) service delivery systems, and 3) back‐office operations, e.g. accounting, computing, and advertising, among others. The analysis is conducted using average data drawn from a sample of 118 large US commercial banks for the years 1989 and 1990. The analysis reveals that centralized decision‐making tends to increase costs. Likewise, centralized service delivery systems either increase or have an insignificant impact on costs. In no case was it found that centralized service delivery systems reduce costs as is often envisioned by proponents of centralization. Centralized back‐office operations were found to reduce costs significantly and is consistent with the existence of scale economies in bank back‐office operations.

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Managerial Finance, vol. 23 no. 1
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 November 1997

Aigbe Akhigbe, Jeff Madura and Huldah Ryan

Much attention has recently been directed toward the relationship between the performance of firms and compensation received by their respective CEOs. We assess this relationship…

803

Abstract

Much attention has recently been directed toward the relationship between the performance of firms and compensation received by their respective CEOs. We assess this relationship for commercial banks, as regulatory and other industry‐specific conditions can cause the performance‐compensation linkage in the banking industry to differ from that of industrial firms. We find that the accumulated human capital of CEOs and the bank size are positively related to the total compensation (including salary, bonus, and stock options) levels of bank CEOs. We also find a positive significant relationship between bank accounting performance proxies and CEO compensation level for all time horizons. Finally, we find a positive significant relationship between market‐based performance proxy and bank compensation.

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Managerial Finance, vol. 23 no. 11
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 March 1996

Joseph D. Haley and Kevin J. Sigler

During the spring and early summer of 1991 the life insurance industry experienced an unprecedented series of major life insurer insolvencies. The objective of this paper is to…

78

Abstract

During the spring and early summer of 1991 the life insurance industry experienced an unprecedented series of major life insurer insolvencies. The objective of this paper is to determine whether or not policyholder panic resulted from these failures. The analysis shows that each of the failed companies which are evaluated had unique financial problems which caused their demise. And through the use of an event study methodology it is concluded that industry‐wide policyholder panic did not occur as a result of the life insurer failures.

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Managerial Finance, vol. 22 no. 3
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 September 2004

Linbo Fan and Sherrill Shaffer

This paper studies the profit efficiency of a sample of large U.S. commercial banks and explores how this performance varies with selected measures of bank risk reflecting aspects…

1656

Abstract

This paper studies the profit efficiency of a sample of large U.S. commercial banks and explores how this performance varies with selected measures of bank risk reflecting aspects of credit risk, liquidity risk, and insolvency risk. We use a standard profit function and the stochastic frontier approach, and compare two standard functional forms – Cobb‐Douglas and translog – to assess the tradeoff between precision and parsimony. We find that profit efficiency is sensitive to credit risk and insolvency risk but not to liquidity risk or to the mix of loan products.

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Managerial Finance, vol. 30 no. 9
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 January 1997

Robert DeYoung

A thick cost frontier methodology is used to estimate pre‐ and postmerger X‐inefficiency in 348 mergers approved by the OCC in 1987/88. Efficiency improved in only a small…

857

Abstract

A thick cost frontier methodology is used to estimate pre‐ and postmerger X‐inefficiency in 348 mergers approved by the OCC in 1987/88. Efficiency improved in only a small majority of mergers, and these gains were unrelated to the acquiring bank's efficiency advantage over its target. These results are not consistent with the traditional market for corporate control story, in which well‐managed firms acquire poorly managed firms and subsequently improve their performance. Rather, the results suggest motivations other than cost efficiencies were driving U.S. bank mergers in the late 1980s. Efficiency gains were concentrated in mergers where acquiring banks made frequent acquisitions, suggesting the presence of experience effects.

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Managerial Finance, vol. 23 no. 1
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 16 November 2010

Robert Webb, Cormac Bryce and Duncan Watson

This paper aims to investigate the effect of UK building society demutualisation on levels of efficiency at the largest five commercial banks in the UK.

1177

Abstract

Purpose

This paper aims to investigate the effect of UK building society demutualisation on levels of efficiency at the largest five commercial banks in the UK.

Design/methodology/approach

This research utilises data envelopment analysis (DEA) within a rarely adopted windows framework to analyse efficiency. The study also incorporates a novel risk proxy in the profit‐orientated approach to determine DEA input/output which proves a useful innovation to the methodology.

Findings

The overall aggregate results suggest that converting building societies outperformed their bank counterparts in all areas of efficiency and that scale efficiency dominates pure technical efficiency. Interestingly, the results also indicate that the level at which institutions continue to find economies of scale had increased when compared to previous research.

Originality/value

The period of building society demutualisation offers an empirical opportunity to examine deregulation upon market participants. It is felt that this study offers academics, regulators and participants within the financial services environment an insight into the efficiency impact of deregulation.

Details

Journal of Financial Regulation and Compliance, vol. 18 no. 4
Type: Research Article
ISSN: 1358-1988

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