A quantile regression approach to bank efficiency measurement^*

Adjustment costs in the technical efficiency: An application to global banking

“…Despite the importance of correctly measuring technical efficiency and its underlying adjustment costs there is limited evidence (Tsionas, 2006;Kien and Tsionas, 2016;Tsionas, 2016). There is, of course, an extensive literature on bank efficiency (Altunbas et al, 2001;Koutsomanoli-Filippaki and Mamatzakis, 2009;Lozano-Vivas A., Pasiouras F., 2010;Koutsomanoli-Filippaki and Mamatzakis, 2011; Bolta and A C C E P T E D M A N U S C R I P T 4 Humphrey, 2015; Galán et al 2015) that this paper relates to. A common finding of the literature is the high level of cross-country heterogeneity in the global banking industry, (i.e.…”

“…Much of the attention has focused on the structural reforms needed to restore efficiency in the banking industry. Such voices of bank restructuring across operating costs, and in particular personnel expenses, have not been new as there were present well before the financial crisis (Koutsomanoli-Filippaki and Mamatzakis, 2009;Koutsomanoli-Filippaki and Mamatzakis, 2011). However, the crisis revealed that the warranted structural reforms were delayed, and certainly had not been carried out during good times (Mamatzakis et al 2015;Galán et al, 2015).…”

“…Yet, the literature to this day in all models of technical efficiency remains agnostic regarding the dependency of technical efficiency to adjustment costs in variable inputs. The norm in the literature (Koutsomanoli-Filippaki and Mamatzakis, 2009;Lozano-Vivas A. and Pasiouras F., 2010;Koutsomanoli-Filippaki and Mamatzakis, 2011;Tzeremes, 2015;Tsionas 2015;Bolta and Humphrey, 2015;Galán et al 2015;) is to assume that adjustment costs in variable inputs are not significant. However, the technical efficiency is determined from the allocation of inputs by the bank to production on the one hand and to efficiency on the other.…”

“…A common finding of the literature is the high level of cross-country heterogeneity in the global banking industry, (i.e. Altunbas et al, 2001;Lozano-Vivas A., Pasiouras F., 2010; Koutsomanoli-Filippaki and Mamatzakis, 2011;Bolta and Humphrey, 2015;Galán et al 2015). 1 Tsionas (2006) show that the variability in bank efficiency in US could be explained by adjustment costs.…”

“…To overcome such difficulties we propose to employ a non-parametric likelihood estimation method, opting for Local Linear 1 The literature on bank efficiency is quite vast. A starting point could be traced back to Berger and Mester, (1997), that seemed to spark various studies thereafter (see for example for European banks, Koutsomanoli-Filippaki and Mamatzakis, 2009;Koutsomanoli-Filippaki and Mamatzakis, 2011; whereas for transition economies see Mamatzakis, (2009), Tsionas et al, (2015), Gahan et al (2015) and for the US banking see Tsionas (2015). It is evident that most of the empirical studies focus on advanced economies and it is not common examine bank efficiency at a global level.…”