A note on efficiency and productivity growth in the Korean Banking Industry, 1992–2002

Park, Kang H.; Weber, William

doi:10.1016/j.jbankfin.2005.09.013

Cited by 208 publications

(128 citation statements)

References 25 publications

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“…Berg et al (1992) model the production technology of banks by directly incorporating the quality of assets; however, they do not use NPLs as an undesirable output. Park and Weber (2006) use the directional technology distance function to estimate the inefficiency and productivity change of Korean banks for the period 1992-2002. They treated NPLs as an undesirable byproduct arising from the production of loans and included them directly in the production process.…”

Section: Introductionmentioning

confidence: 99%

Profit efficiency of banks in Colombia with undesirable output: a directional distance function approach

Almanza

Rodríguez

2018

Economics

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This article analyzes the sources of bank efficiency in Colombia over the period 2000-2011. To perform this research, the authors propose a score of bank efficiency using the directional distance function, which was estimated using data envelopment analysis. Additionally, they use an ordered probit panel regression to explore the effects of some market-related and bank-specific factors on efficiency. The results show that the noninclusion of non-performing loans (NPLs) leads to higher bank inefficiency indicators, which are significantly different from those obtained when NPLs are included. Further, they find that economic growth, capital risk, foreign and national banks, and account liquidity risk explain, in part, the efficiency of Colombian banks. JEL D22 G21

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Section: Introductionmentioning

confidence: 99%

Profit efficiency of banks in Colombia with undesirable output: a directional distance function approach

Almanza

Rodríguez

2018

Economics

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“…Undesirable outputs are present in many operations context. Undesirable outputs include debts or loans, accidents, delays, corporate social irresponsibility, defective products, and waste (e.g., Chen and Delmas 2011;Callens and Tyteca 1999;Park and Weber 2006;Pathomsiri et al 2008). Our model can therefore provide a useful tool to evaluate operational efficiencies in these contexts.…”

Section: Introductionmentioning

confidence: 99%

Measuring Eco-Inefficiency: A New Frontier Approach

Chen

Delmas

2012

Operations Research

149

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Increasing social concerns over the environmental externalities associated with business activities are pushing firms to identify activities that create economic value with less environmental impact and to become more eco-efficient. Over the past two decades, researchers have increasingly used frontier efficiency models to evaluate productive efficiency in the presence of undesirable outputs, such as greenhouse gas emissions. In this paper, we identify critical flaws of existing frontier models and show that under these models eco-inefficient firms can be identified as eco-efficient. We develop a new ecoinefficiency frontier model that rectifies these problems. Our model allows us to calculate, for each firm, an eco-inefficiency score and improvements in outputs necessary to attain eco-efficiency. We demonstrate, through a Monte-Carlo experiment that our eco-inefficiency model provides a more reliable measurement of corporate eco-inefficiency than the existing frontier models. In the simulation experiment we develop a production function of multiple desirable and undesirable outputs that extends the classical Cob-Douglas function of a single output. The multi-output production function allows for greater flexibility in the simulation analysis of frontier models.

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“…This method, in which loan losses (the proxy of ex-post credit risk) are included as an undesirable output that affects the production process, was initially introduced in Berg et al (1992). Other studies have followed the same approach using the share of NPLs as a measure of credit risk exposure and alternative cost functions or input distance functions (Mester, 1996;Hughes and Mester, 1998;Park and Weber, 2006;Zago and Dongili, 2011;Barros et al, 2012;Assaf et al, 2013).…”

Section: Frontier Efficiency Methods and Bank Risk-takingmentioning

confidence: 99%

“…Credit risk proxies are usually included into costs and profit functions as a measure of output quality that directly affects the technology (Mester, 1996;Hughes and Mester, 1998) or as an undesirable output where reductions are desirable (see some applications in Park and Weber, 2006;Zago and Dongili, 2011;Assaf et al, 2013). Under that approach, risk-taking is assumed as an exogenous component of the banking production process.…”

Section: Introductionmentioning

confidence: 99%

Heterogeneous Effects of Risk-Taking on Bank Efficiency: A Stochastic Frontier Model with Random Coefficients

Sarmiento

Galán

2014

SSRN Journal

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We estimate a stochastic frontier model with random inefficiency parameters, which allows us not only to identify the role of bank risk-taking on driving cost and profit inefficiency, but also to recognize heterogeneous effects of risk exposure on banks with different characteristics. We account for an integral group of risk exposure covariates including credit, liquidity, capital and market risk, as well as bank-specific characteristics of size and affiliation. The model is estimated for the Colombian banking sector during the period 2002-2012. Results suggest that risk-taking drives inefficiency and its omission leads to over (under) estimate cost (profit) efficiency. Risk-taking is also found to have different effects on efficiency of banks with different size and affiliation, and those involved in mergers and acquisitions. In particular, greater exposures to credit and market risk are found to be key profit efficiency drivers. Likewise, lower liquidity risk and capital risk lead to higher efficiency in both costs and profits. Large, foreign and merged banks benefit more when assuming credit risk, while small, domestic and non-merged banks institutions take advantage of assuming higher market risk.

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A note on efficiency and productivity growth in the Korean Banking Industry, 1992–2002

Cited by 208 publications

References 25 publications

Profit efficiency of banks in Colombia with undesirable output: a directional distance function approach

Profit efficiency of banks in Colombia with undesirable output: a directional distance function approach

Measuring Eco-Inefficiency: A New Frontier Approach

Heterogeneous Effects of Risk-Taking on Bank Efficiency: A Stochastic Frontier Model with Random Coefficients

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