scholarly journals Measuring Cost Efficiency of Ukrainian Banks in 2008

2013 ◽  
Vol 15 (4) ◽  
pp. 207-217 ◽  
Author(s):  
Anatoliy Pilyavskyy ◽  
Yuriy Matsiv ◽  
Olga Vovchak
Keyword(s):  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Functional Form ◽  
Statistical Tests ◽  
Stochastic Frontier ◽  
Frontier Analysis ◽  
Average Value ◽  
Personnel Costs ◽  
Banking Activity ◽  
Size Type

The paper presents the results of a stochastic frontier analysis (SFA) of cost-efficiency of Ukrainian banks. As of lack of data on the personnel costs, we had to set limits to the year of 2008 only. To modeling banking activity, we apply the intermediary approach as one of the most commonly used in literature. Considering the results of statistical tests, we chose translog functional form of cost function and half–normal distribution of random inefficiency term. As a result of the research, we found out that efficiency of Ukrainian banks varies within 0.5224 and 0.9869 with an average value of 0.8734. Having checked a range of hypotheses, we discovered insignificant distinctions among banks by their size, type of owner and location.

scholarly journals The cost efficiency of Vietnamese banks – the difference between DEA and SFA

2020 ◽  
Vol 22 (2) ◽  
pp. 209-227
Author(s):  
Phong Hoang Nguyen ◽  
Duyen Thi Bich Pham
Keyword(s):  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Random Noise ◽  
Stochastic Frontier ◽  
Time Consistency ◽  
Efficiency Frontier ◽  
Content Type ◽  
Frontier Analysis ◽  
The Difference ◽  
The Cost

PurposeThe paper aims to enrich previous findings for an emerging banking industry such as Vietnam, reporting the difference between the parametric and nonparametric methods when measuring cost efficiency. The purpose of the study is to assess the consistency in issuing policies to improve the cost efficiency of Vietnamese commercial banks.Design/methodology/approachThe cost efficiency of banks is assessed through the data envelopment analysis (DEA) and the stochastic frontier analysis (SFA). Next, five tests are conducted in succession to analyze the differences in cost efficiency measured by these two methods, including the distribution, the rankings, the identification of the best and worst banks, the time consistency and the determinants of efficiency frontier. The data are collected from the annual financial statements of Vietnamese banks during 2005–2017.FindingsThe results show that the cost efficiency obtained under the SFA models is more consistent than under the DEA models. However, the DEA-based efficiency scores are more similar in ranking order and stability over time. The inconsistency in efficiency characteristics under two different methods reminds policy makers and bank administrators to compare and select the appropriate efficiency frontier measure for each stage and specific economic conditions.Originality/valueThis paper shows the need to control for heterogeneity over banking groups and time as well as for random noise and outliers when measuring the cost efficiency.

scholarly journals The Cost Efficiency of the Brazilian Electricity Distribution Utilities: A Comparison of Bayesian SFA and DEA Models

2010 ◽  
Vol 2010 ◽  
pp. 1-20 ◽  
Author(s):  
Marcus Vinicius Pereira de Souza ◽  
Madiagne Diallo ◽  
Reinaldo Castro Souza ◽  
Tara Keshar Nanda Baidya
Keyword(s):  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Fundamental Aspect ◽  
Data Envelopment ◽  
Electricity Distribution ◽  
Frontier Analysis ◽  
Dea Models ◽  
The Cost ◽  
Analysis Models

The purpose of this study is to evaluate the efficiency indices for 60 Brazilian electricity distribution utilities. These scores are obtained by DEA (Data Envelopment Analysis) and Bayesian Stochastic Frontier Analysis models, two techniques that can reduce the information asymmetry and improve the regulator's skill to compare the performance of the utilities, a fundamental aspect in incentive regulation schemes. In addition, this paper also addresses the problem of identifying outliers and influential observations in deterministic nonparametric DEA models.

Cost-efficiency of buses using stochastic frontier analysis

2017 ◽  
Vol 170 (4) ◽  
pp. 185-193 ◽  
Author(s):  
Weiquan Zhu ◽  
Xiaoguang Yang ◽  
Hongwei Ge ◽  
Binglei Xie
Keyword(s):  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Frontier Analysis

Measuring efficiency of Vietnamese banks

2017 ◽  
Vol 29 (2) ◽  
pp. 171-182 ◽  
Author(s):  
Thanh Ngo ◽  
David Tripe
Keyword(s):  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Control Variable ◽  
Banking System ◽  
Alternative Methods ◽  
Content Type ◽  
Frontier Analysis ◽  
Using Data ◽  
The Cost

Purpose This paper aims to examine alternative methods for treating nonperforming loans (NPLs) in bank cost-efficiency studies using stochastic frontier analysis (SFA). Design/methodology/approach The authors consider three methods of treating NPLs in SFA: as an additional control variable, as an environmental factor or as a deduction from total loans. Using data from the Vietnamese banking system (2003-2010), the authors then compare these results with those of the base model (where total loans is used regardless of the NPLs) to see which one is more appropriate for this study. Findings The authors observed that the first two methods are inappropriate for the analysis: one cannot find the significant relationship between NPLs and the banks’ total cost, and the other cannot account for any inefficiency at all. The authors suggested that the third method of separating NPLs from total loans can provide better insights. Using the proposed method, the authors showed that the cost-efficiency of Vietnamese banks over the period examined was moderate with a slight decreasing trend. When NPLs are separated, the cost-efficiency decreases in state-owned banks and big banks, whereas it increases in small and private banks. Research limitations/implications Research is limited to Vietnamese banks during a certain period, and it would be useful to apply the same technique to other data sets. Practical implications The paper suggests a new approach to account for NPLs in cost SFA studies in banking. Originality/value The paper provides a much more searching analysis of NPLs in banking than has generally been seen in previous research.

Stochastic cost frontier analysis – a sensitivity analysis on cost measures

2016 ◽  
Vol 28 (4) ◽  
pp. 401-410 ◽  
Author(s):  
Thanh Ngo ◽  
David Tripe
Keyword(s):  
New Zealand ◽  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Banking System ◽  
Alternative Methods ◽  
Data Sets ◽  
Content Type ◽  
Frontier Analysis ◽  
Cost Frontier

Purpose This paper aims to examine alternative methods for recording and treating costs in studies of bank efficiency. Design/methodology/approach This study used stochastic frontier analysis (SFA) models with core costs and total costs to estimate the cost efficiency of banks in two different economies, Vietnam where the banking system is under-developed (and thus is dominated by traditional banking activities) and New Zealand where the banking system is well-developed (and thus non-traditional banking activities play an important role). Findings The authors found that models using total cost tend to underestimate the banks’ cost efficiency. This underestimation relates to the extent of modern activities in a banking system: it is larger in an advanced banking system (i.e. New Zealand) and smaller in a less-developed banking system (i.e. Vietnam). Research limitations/implications Research is limited to two countries, and it would be useful to apply the same technique to other data sets. Practical implications The paper suggests a new approach to cost SFA studies in banking. Originality/value The paper provides a much more searching analysis of costs in banking than has generally been seen in previous research.

scholarly journals THE EFFECTS OF COMPETITION ON EFFICIENCY: THE VIETNAMESE BANKING INDUSTRY EXPERIENCE

2017 ◽  
pp. 1-30 ◽  
Author(s):  
THANH PHAM THIEN NGUYEN ◽  
SON HONG NGHIEM
Keyword(s):  
Cost Efficiency ◽  
Banking Sector ◽  
Stochastic Frontier Analysis ◽  
Global Financial Crisis ◽  
Stochastic Frontier ◽  
Bank Efficiency ◽  
Frontier Analysis ◽  
The Cost ◽  
Efficiency Effects ◽  
Industry Experience

Given considerable changes in the Vietnamese banking environment brought about by significant reforms towards liberalization during the last two decades, this study investigates the evolution of competition and efficiency, compares the competition and efficiency of state-owned banks to joint-stock banks, and then tests the “quiet life” hypothesis in this industry over the period 2000–2014. This study employs the efficiency-adjusted Lerner index (i.e., market power) to capture competition, and the cost efficiency estimated by a Fourier-flexible function stochastic frontier analysis (SFA) to capture bank efficiency. This study firstly finds a slight improvement of competition and cost efficiency in the Vietnamese banking sector over the analysis period. Secondly, there are no significant differences in competition and cost efficiency level between state-owned and joint-stock banks. Thirdly, a positive causality running from competition to cost efficiency is documented, providing evidence of supporting the “quiet life” hypothesis. Finally, positive efficiency effects of the banks’ capital ratio and size are found, while insignificant impacts of the growth of GDP per capita and 2007 global financial crisis were observed. The results are strongly robust to a variety of tests. The findings suggest pro-competition, pro-capitalization and pro-size expansion policies in the Vietnamese banking sector if targeting at improving the cost efficiency of Vietnamese banks.

A comparative approach of stochastic frontier analysis and data envelopment analysis estimators: evidence from banking system

2020 ◽  
Vol 47 (7) ◽  
pp. 1787-1810
Author(s):  
Kekoura Sakouvogui
Keyword(s):  
Data Envelopment Analysis ◽  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Data Envelopment ◽  
Content Type ◽  
Frontier Analysis ◽  
Efficiency Measures ◽  
Clustering Approach ◽  
Over Time

PurposeThe consistency of stochastic frontier analysis (SFA) and data envelopment analysis (DEA) cost efficiency measures using a sample of 650 commercial and domestic banks in the United States is investigated based on cluster analysis while accounting for the yearly variation in banks.Design/methodology/approachDue to the importance of efficiency measures for policy and managerial decision-making, the cost efficiency measures of SFA and DEA estimators are examined according to four criteria: levels, rankings, stability over time and stability over clustering groups. In this paper, we present two clustering methods, Gap Statistic and Dindex, that involve SFA and DEA cost efficiency measures. The clustering approach creates homogeneous groups of banks offering a similar mix of efficiency levels. Hence, each evaluated bank knows the cluster to which it belongs. Furthermore, this paper provides nonparametric statistical tests of SFA and DEA cost efficiency measures estimated with and without a clustering approach.FindingsThe results suggest that the clustering approach plays a considerable role in the rankings of US banks. Furthermore, the average SFA and DEA cost efficiency measures over time of the homogeneous US banks are substantially higher than those of the heterogeneous US banks.Originality/valueThis research is the first to provide comparative efficiency measures needed for desirable policy conclusions of heterogeneous and homogeneous US banks.

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