Measuring the Efficiency of Agricultural Banks

Neff, David L.; Dixon, Bruce L.; Zhu, Suzhen

doi:10.2307/1243686

Cited by 13 publications

(8 citation statements)

References 5 publications

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“…The approach assumes a proportion of the sample is perfectly efficient. These firms in those cases are therefore "self-referencing" and their efficiency estimate is equal to one (Neff et al, 1994).…”

Section: Efficiency Of the Farm Credit Systemmentioning

confidence: 99%

“…The SFA requires a particular functional form plus embodies assumptions about distribution of efficiency (Neff et al, 1994). Those assumptions might not truly reflect the firm's underlying technology but studies by Bauer et al (1998) and Vander Vennet (2002) showed when comparing different functions and models estimated under different assumptions, the estimation results are not significantly different (Pasiouras et al, 2007).…”

Section: Efficiency Of the Farm Credit Systemmentioning

confidence: 99%

“…The TFA puts no restriction on the correlations between inefficiencies and the regressors but the estimation results provide little information on firm specific inefficiency (Neff et al, 1994). The DFA assumes that for a given firm the random errors will average out over time but as Sfiridis and Daniels (2006) pointed out this might not be reasonable, especially for short time periods.…”

Section: Efficiency Of the Farm Credit Systemmentioning

confidence: 99%

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Measuring the efficiency of the Farm Credit System

Dang

Leatham

McCarl

et al. 2014

Agricultural Finance Review

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Purpose -The purpose of this paper is to develop information on the relative efficiency of Farm Credit System (FCS) lenders. Also the evolution of relative efficiency is examined as influenced by the biofuel boom, the financial crisis, and farm income increases. The paper aims to discuss these issues. Design/methodology/approach -A stochastic frontier production function is used to estimate technical efficiency of FCS banks and associations. Findings -A significant difference is found in efficiency between large and small associations and banks. Larger asset bases and management compensation are found to be positively associated with efficiency. Banks are found to have higher technical efficiency than associations (66-46 percent). Association efficiency is found to be increasing indicating likely effects of recent consolidation. The financial crisis was not found to have a significant effect with the bioenergy and farm income booms being likely countervailing forces. Research limitations/implications -Further work is needed on the impact of the biofuel boom, increases in farm income, and new regulations.Practical implications -The study provides information and indications of strategies for FCS management including additional consolidation. Originality/value -This does an updated assessment of FCS efficiency taking into account changes in consolidation, lending practices, and economic conditions. Implications are developed for management actions such as more consolidation. The study also uses a more advanced methodology compared to older studies.

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Section: Efficiency Of the Farm Credit Systemmentioning

confidence: 99%

Section: Efficiency Of the Farm Credit Systemmentioning

confidence: 99%

Section: Efficiency Of the Farm Credit Systemmentioning

confidence: 99%

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Measuring the efficiency of the Farm Credit System

Dang

Leatham

McCarl

et al. 2014

Agricultural Finance Review

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“…Neff et al (1994) warn that different methodologies provide different estimates of inefficiency. Featherstone and Moss (1994) find very small economies of scale in agricultural banking and no economies of scope.…”

Section: A Agricultural Lendingmentioning

confidence: 99%

Relationship Lending and Denovo Banks: An Examination of Bank Lending to Small Farm Borrowers

Akhavein¹,

Goldberg

White

2002

SSRN Journal

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In this paper we examine the lending by small banks to small farms. We find that relationships, as measured by the length of tenure of farm operators, are positively related to bank lending. We also find that denovo banks have a positive tendency to lend to small farms, similar to the tendency of denovo banks to lend to small businesses generally. When existing relationships between borrowers and incumbent lenders are stronger, however, denovo banks have greater difficulties in lending to small farms. Finally, we find that, even within the category of small banks, lending to small farms (as a percentage of a bank's assets) tends to decrease as the bank increases in size. We believe that small farms are a category of small enterprises that have been underresearched in the lending literature and that further study of these relationships would yield new and interesting results.

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“…For US agricultural banks, Featherstone and Moss (1994) estimated the economies of scale and scope using an indirect multiproduct and normalized quadratic cost function, finding that restrictive interstate banking and branching laws benefit small agricultural banks. Neff et al (1994) estimated profit efficiency using both SFA and the non-parametric data envelopment analysis (DEA), and found bank size to be strongly and negatively related to profit inefficiency, while the agricultural loan ratio is positively related to profit inefficiency. Armah et al (1999) evaluated the performance of agricultural banks using the Malmquist productivity index, concluding that large agricultural banks are more efficient.…”

Section: Introductionmentioning

confidence: 99%

Performance of agricultural cooperative banks in Japan

Harimaya

Kagitani

2019

AFR

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Purpose The purpose of this paper is to investigate the efficiency of the banking business of Japan’s agricultural cooperatives (JAs), which depend heavily on financial business with non-farmers, contradictory to cooperative principles. Design/methodology/approach The authors construct a panel data set over 2005–2016 from the financial statements of JAs’ prefectural-level federations and use the input distance stochastic frontier model with a time-variant inefficiency effect for analysis. Both the flow and stock measures of the banking output are used in identical models and the efficiency results are compared. The authors also investigate the determinants of efficiency by using the Tobit and ordinary least squares regression models. Findings There is strong evidence of significant prefectural differences in efficiency values. The ratio of lending to non-members to total loans is positively related to efficiency. In contrast, the higher reliance on a central organization and credit business leads to lower efficiency. Research limitations/implications Apart from banking, JAs provide mutual insurance business services. As the authors investigate only the efficiency of JAs’ banking business in this study, it would be necessary to investigate the efficiency of their insurance business as well when evaluating JAs’ overall financial business. Originality/value There are few studies that investigate the efficiency of JAs’ banking business and its determinants, although significant attention has been paid to their excessive dependence on the financial business.

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Measuring the Efficiency of Agricultural Banks

Cited by 13 publications

References 5 publications

Measuring the efficiency of the Farm Credit System

Measuring the efficiency of the Farm Credit System

Relationship Lending and Denovo Banks: An Examination of Bank Lending to Small Farm Borrowers

Performance of agricultural cooperative banks in Japan

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