Assessing output and productivity growth in the banking industry

Abstract

This paper assesses the evolution of output and productivity in the Greek banking industry for the period 1990-2006. Three main categories of bank output were estimated based on modern theoretical approaches, while for the aggregation and estimation of output and inputs and the estimation of productivity (partial and total factor) we relied on the index number method (Tornqvist index). Additionally, we considered the effect of labor quality on banks' productivity and using a growth accounting framework we examined the contribution of total factor productivity (TFP) to bank output growth. The results show that bank output and labor productivity increased considerably during the period under examination, outpacing the respective GDP growth and labor productivity of the Greek economy. Capital productivity and TFP of the Greek banking industry have also improved remarkably mainly since 1999, as a result of the structural changes that took place within the industry, capital investments (mainly in IT equipment) as well as improvement in the quality of human capital.

Determinants of Bank Profitability in Nigeria

“…The studies by Molyneux and Thornton (1992), Demirguc-Kunt andHuizinga (1999, 2001), Abreu and Mendes (2002), Goddard et al (2004), Beck et al (2005), Athanasoglou et al (2006), Micco et al (2007), Pasiouras and Kosmidou (2007), and Flamini et al (2009) investigate a panel data set of countries. Studies by Berger et al (1987), Berger (1995), Neely and Wheelock (1997), Naceur (2003), Mamatzakis and Remoundos (2003), Naceur andGoaeid (2001, 2005), and Athanasoglou et al (2008) focus their analyses on single countries. Although, results of the empirical analysis of these studies differ based on the specification of the model and the nature of the explanatory variables employed, there still exist reasons to show the significance of bank specific factors, industry related effects and macroeconomic or environmental influence.…”

“…These studies suggest that as bank's capital ratios increase, the cost of funding tend to fall due to lower prospective bankruptcy costs. Furthermore, overhead costs are also an important determinant of profitability: the higher the overhead costs in relation to the assets, the lower the profitability of a bank (Athanasoglou et al, 2008). Molyneux and Thornton (1992) in the study on the determinants of bank profitability use a sample of 18 European countries during the period 1986-1989.…”

“…Their results for the Nigerian market indicate that older banks did not perform as well as newer banks, which were better able to pursue new profit opportunities. Athanasoglou et al (2008) include external determinants of bank profitability such as central bank interest rate, inflation, the GDP development, taxation, or variables representing market characteristics (e.g. market concentration).…”

“…A key result is that the effect of market concentration is positive, while the picture regarding macroeconomic variables is mixed. Athanasoglou, et al (2008) apply a dynamic panel data model to study the performance of Greek banks over the period [1985][1986][1987][1988][1989][1990][1991][1992][1993][1994][1995][1996][1997][1998][1999][2000][2001], and find some profit persistence, a result that signals that the market structure is not perfectly competitive. The results also show that the profitability of Greek banks is shaped by bank-specific factors and macroeconomic control variables, which are not under the direct control of bank management.…”

State-driven in Boom and in Bust: Structural Limitations of Financial Power in Greece

“…In the liberalized environment the banking system boomed. In the period 1990–2006, the total bank output increased significantly by an annual average of 6.6 per cent, a growth rate more than double the respective rate of GDP (Athanasoglou et al 2008). During 1997–2007, according to European Central Bank data, total annual growth of bank lending averaged 18 per cent, attributed mainly to the housing and consumer credit boom.…”