Trademarking status and economic efficiency among commercial banks: Some evidence for the UK

Abstract

a b s t r a c tAs competition in the banking sector has intensified over the last two decades, commercial banks have started to use trademarks to differentiate their products and services from those offered by their competitors. Less clear are the implications of the trademarking activities on the commercial banks' performance. In this paper, we compare the cost and profit efficiency of trademarking and non-trademarking banks in the UK, over the period 2001-2013 using stochastic frontier methods. We use Propensity Score Matching techniques to identify a sample of non-trademarking banks which share the same characteristics as the trademarking banks to ensure that variations in the efficiency between the commercial banks in our sample can be attributed to their trademarking status only. We then explicitly test the hypothesis that trademarking and non-trademarking banks share the same cost and profit frontiers. We cannot reject the hypothesis of a common cost and profit frontier. We also find that trademarking banks tend to be more profit efficient than non-trademarking banks while there is no significant difference between the cost efficiency scores of trademarking and non-trademarking banks.

Do creditor rights and information sharing affect the performance of foreign banks?

“…A restriction of the alternative profit model is that the degree to which banks can exert an influence on the price of outputs will depend on the given input prices, the given quantities of outputs and the technological constraints (Koetter, 2006). The alternative profit model has been widely used in the banking literature (Maudos et al, 2002;Bos and Kool, 2006;Koetter, 2006;Pasiouras et al, 2009;Duygun et al, 2014) Since this paper focuses on the impact of country-level environmental variables such as the cross-country variations in creditor rights and information sharing on bank profit (in)efficiency, we opt for the Battese and Coelli (1995) SFA model in order to estimate bank profit (in)efficiency 8 . This estimation of the frontier accommodates panel data and allows to 6 Efficiency estimations have some distinct advantages over accounting-based measures of performance such as financial ratios (Berger and Humphrey, 1997;Bauer et al, 1998).…”

“…This SFA model provides estimates of bank efficiency and its covariates in a single-stage and has been used in numerous studies that examine the determinants of bank efficiency (e.g. Fiordelisi and Mare, 2013;Duygun et al, 2014). Furthermore, we use the alternative profit efficiency model (Humphrey and Pulley, 1997), which allows for some degree of market power and is commonly used in bank efficiency studies (e.g.…”

“…Furthermore, we use the alternative profit efficiency model (Humphrey and Pulley, 1997), which allows for some degree of market power and is commonly used in bank efficiency studies (e.g. Bos and Kool, 2006;Koetter, 2006;Pasiouras et al, 2009;Duygun et al, 2014) In relation to the first question, our results from the global sample reveal that foreign ownership does have a significant influence on the effect of both creditor rights and information sharing on bank performance. Specifically, creditor rights exert a positive effect on bank efficiency that strengthens for foreign banks.…”

Do Creditor Rights and Information Sharing Affect the Performance of Foreign Banks?

“…A restriction of the alternative profit model is that the degree to which banks can exert an influence on the price of outputs will depend on the given input prices, the given quantities of outputs and the technological constraints (Koetter, 2006). The alternative profit model has been widely used in the banking literature (Maudos et al, 2002;Bos and Kool, 2006;Koetter, 2006;Pasiouras et al, 2009;Duygun et al, 2014) Since this paper focuses on the impact of country-level environmental variables such as the cross-country variations in creditor rights and information sharing on bank profit (in)efficiency, we opt for the Battese and Coelli (1995) SFA model in order to estimate bank profit (in)efficiency 8 . This estimation of the frontier accommodates panel data and allows to 6 Efficiency estimations have some distinct advantages over accounting-based measures of performance such as financial ratios (Berger and Humphrey, 1997;Bauer et al, 1998).…”

Trademarking activities and total factor productivity: Some evidence for British commercial banks using a metafrontier approach

“…For instance, a couple of studies have found that there exists a positive association between the value of the Tobin's q among commercial banks and their trademarking activity (Gonzalez-Pedraz and Mayordomo, 2011;Greenhalgh and Rogers, 2006). In a similar vein, Duygun et al (2014) have found that trademarking banks tend to be more profit-efficient than their non trademarking counterparts. However, we argue that trademarking may potentially affect other dimensions of a bank's performance like Total Factor Productivity growth (TFP growth, henceforth) and its components.…”