Table 6.
Inputs, outputs, exogenous variables and their impacts on efficiency, by approach and efficiency.
| Number | Type of Efficiency | Scope of Analysis | Inputs 1oStage | Intermediate Variables | Outputs 2o Stage | Exogenous Variables | Impact on Efficiency |
|---|---|---|---|---|---|---|---|
| 37 | TE and PTE. | Profitability (1st stage) and marketability (2nd stage). | Number of employees, fixed assets and information technology expenditure annual. | Deposits, liabilities and ATFD (Amount of trading by financial derivatives). | Operating diversification, branches and non performing loans recovered. | Two governance variables: Government Shareholdings (SOE), Financial Holding Subsidiary (FHS). Variables related to risk factors: Exchange Rate Volatility (ERV), Interest Volatility (INV), Long-term loan to capital (LCR). Variable related to Basel III Accord: Capital Adequacy Ratio (CAR). | TE: CAR, ERV, SOE and FHS have positive impact and LCR has negative impact. SE: CAR, SOE and FHS positive, ERV, IRV negative. PTE: CAR and FHS positive, ERV and IRV negative. |
| 24 | PTE. | Deposits generation (1st stage) and loan generation (2nd stage). | Fixed assets, equity and personnel expenses. | Deposits and other raised funds. | Gross loans, other earning assets and an undesirable output of non-performing loans. | Risk, assets liquidity, interest margin, shareholders behind and scale effect. Macroeconomic factors: the annual growth rate of GDP (g gdp), annual growth rate of money (GRM) and market structure. | Overall - Positive impact: risk, liquidity, shareholders behind and size. Negative impact: interest margin. Others variables were not statistically significant. Stage 1 - Positive impact: risk, liquidity, shareholders behind, size and GRM. Other variables were not statistically significant. Stage 2 - Positive impact: liquidity and assets. Negative impact: interest margin, Shareholders behind and GRM. |
| 11 | SBM - TE and PTE. | Intermediation approach, production approach and profit approach. | Production: nine personnel-related inputs. Intermediation (5): cash balances, fixed assets, other liabilities, net non performing loans, loan loss experience. Profit (6): personnel expenses, occupancy/computer expenses, loan losses, cross charges, other expenses and sundry expenses. | Do not apply. | Production: (9) segregated by the three main costumers type: Retail: relationship, service, internal. Commercial: relationship, service, internal. Corporate: relationship, service, internal. Intermediation: (6) Wealth management, home-owner mortgages, consumer lending, commercial loans, commercial deposits, consumer deposits. Profit: (7) comissions, consumer deposits, consumer lending, wealth management, home mortgages, commercial deposits e commercial loans. | Regions, market size and scale. | Some regions of Canada showed higher efficiency values for each model analysed. Branches in Rural market had a better performance in profit and production than Small Urban and Major Urban branches. In the three efficiencies considered, increasing asset size results in a larger percentage of branches being classified as DRS. |
| 48 | Not identified. | Intermediation (1st stage) and Profit (2nd stage). | Fixed assets, number of employees and loanable funds (Deposits and borrowings). | Advances and investment. | Interest income and non interest income. | Size, liquidity, profitability, risk, diversification, ownership, IC. | Intermediation efficiency: Size, liquidity and priority positively impacted, IC negatively impacted and the others variables were not statistically significant. Profit efficiency (operating): profitability and diversification had a positive impact, whereas the other variables were not significant. |
| 50 | PTE. | Intermediation and profit. | Operational expenses, loanable funds and capital stock. | Investment, performing loans and outputs that leaves the production system: service revenues and nonperforming loan. | Interest income and investment revenue. | Ratio of investments to loans and the ratio of nonperforming loans to performing loans. | No significance was found in the estimations assessed. |
| 49 | Malmquist. | Intermediation approach. | Total deposits (), total labour () and capital (). | Do not apply. | Total loans () and total investments (). | Bank specific (7): Size, credit risk, capitalization, market power, liquidity, management efficiency and dummy for domestic islamic bank. Macroeconomics: economic growth, inflation and world financial crisis. | TFPCH — negative impact: capitalization. Liquidity and world financial crisis had positive impacts, however the relationship varies among models. |
| 28 | Not identified. | Intermediation approach. | Number of branches and number of employees. | Administrative expenses and personnel expenses. | Equity and permanent assets. | Size, public, domestic, foreign and recent M& A. | Cost Efficiency: Size and recent M&A positively impacted, whereas the other variables were not significant. Productive efficiency: State owned positively impacted, recent M&A negatively impacted and the others variables were not significant. |
| 27 | Not identified. | Intermediation approach. | : total liability ratio; : total equity ratio; : unit cost of employee. | : profit ratio; : return on asset (ROA); : return on equity (ROE). | Book-to-market equity ratio (B/M) and Earnings to price ratio (E/P). | Intellectual capital, measured by three variables: human capital (HC), structural capital (SC) and relational capital (RC) | The efficiency assessed is the efficiency of each subprocess combined through the relational network model. HC, SC e RC positively impacted the efficiency. |
| 34 | Not identified. | Intermediation approach. | Capital, deposits and labour. | Do not apply. | Conventional banks: interest income, non-interest income and total loans. Islamic banks: financing income, non-interest income and total financing. | Three macroeconomic variables: Growth domestic product (GDP), inflation and concentration. Seven bank specific variables: Dummy for islamic banks, size, capitalization, profitability, credit risk, diversification and market power. | Market power, the fact that the bank is islamic, GDP, profitability and concentration showed positive impacts on efficiency. Size, capitalization and diversification had negative impacts and inflation and credit risk were not statistically significant. |
| 17 | PTE. | Intermediation approach. | Deposits, number of employees and fixed assets. | Do not apply. | Securities and loans. | Potential M&A. | During the crisis, the vast majority of potential M&A did not generate gains in efficiency. In the last year analysed this situation changed with an improvement in efficiency due to M&A. |
| 14 | PTE. | Intermediation approach. | Interest expenses, operational expenses net of personnel expenses, personnel expenses and total deposits. | Do not apply. | Performing loans, other earning assets, interest revenue and non-interest revenue. | Influence of integration and coordination efforts on banking efficiency, and on convergence within the GCC countries. | Tests corroborate convergence in banking efficiency. Integration and harmonization measures had a significant effect on efficiency and on the degree of homogeneity in the GCC banking industry. |
| 35 | PTE. | Intermediation approach. | Total deposits, capital and personnel expenses. | Do not apply. | Loans, investments and non-interest income. | Six bank specific variables: ratio of loan loss provisions to total loans (LLP/TL), ratio of non-interest income over total assets (NII/TA), ratio of non-interest expenses to total assets (NIE/TA), LOANS/TA, LN(TA), EQASS. Five external factors: LN(GDP), LN(INFL), LN(CR3), LN(Z-score), LN(MKTCAP/GDP). Bank ownership: (foreign, governmental, listed in the public stocks). | Positive impacts: Size (lnTA), capitalization (LN(EQASS)), diversification (ln (NII/TA)), GDP, CR3, Z-score (proxy for sector risk to default) and foreign. Negative impacts: LN(MKTCAP/GDP) (Proxy for financial market development), listed in the public stocks and governamental. Other variables were not statistically significant. |
| 38 | PTE. | Intermediation approach. | Total funding, fixed assets and number of employees. | Do not apply. | Net profit and other earning assets. | Governance reform variables: foreign partial acquisition, public listing, short-term and long term partial foreign partial acquisition, short term and long term public listing. Control variables: time, state-owned banks, equity to total assets and GDP growth. | Public listing, time, state-owned banks, equity to total assets and GDP growth positively impacted efficiency. On the other hand, foreign partial acquisition negatively impacted efficiency. Other variables were not statistically significant. |
| 47 | PTE. | Intermediation approach. | Number of employees and physical capital. | Deposits. | Performing loans, securities investments and a bad output: Nonperforming loans. | Capitalization, Net Interest Margin (NIM), risk, Industrial Index, bankrupt loans (BRL). | Capitalization, NIM, risk and BRL negatively impacted efficiency, whereas Industrial Index had a positive impact. |
| 6 | SBM-PTE. | Intermediation approach. | Deposits, labour, capital and physical capital | Do not apply. | Loans adjusted to non-performing loans, investments and other earning assets, fee income and off-balance sheet items. | Variables related to restructuring measures: dummy variables for domestic bank mergers (MER), foreign bank entry (FOR), and state intervention (SI). Five country-specific factors: Market Concentration Index (MC), Interbank Interest Rate (INT), Intermediation Ratio (IR), per capita GDP (PCGDP), and IMF supports (IMFS); Control variable: Size. | The impacts analysed are not in the efficiency index but in the lacks of the inputs. Several variables had an impact on these lacks. |
| 7 | TE. | Intermediation approach. | Labour, capital and purchased funds. | Do not apply. | Total loans net of provision loans, deposits and investments. | Size, ownership, non-performing loan (NPL), market share (MS), equity and activity. | Allocative efficiency: NPL and equity negatively impacted; MS, the fact that the bank is domestic and state-owned positively impacted efficiency. Technical efficiency: MS had a positive impact; Cost efficiency: MS and state-owned positively impacted and MS of the previous year negatively impacted. Other variables were not statistically significant. |
| 46 | TE | Intermediation approach | Third-party funds, total assets, and labour costs. | Do not apply. | Financing and operating income. | Asset, the number of bank branches (BRANCHES), return on assets (ROA), capital adequacy ratio (CAR), and non-performing financing (NPF). | Negative impact: Asset and ROA. Positive impact: Branches. Others variables were not statistically significant. |
| 4 | TE and PTE. | Intermediation approach. | Total deposits, total costs (interest expenses and non-interest expenses), and equity. | Do not apply. | Loans, other earning assets and non-interest income. | Five bank specific variables: LOGTA which corresponds to the logarithm of bank’s total assets and controls for bank’s size; EQAS is the equity to assets ratio and controls for capital strength; LOANTA is bank’s net loans to total assets ratio, and is a measure of loan activity; ROE is the pre-tax profit divided by equity; EXPTA is the non-interest expenses to assets ratio. 12 variables related to country-specific factors. | PTE - Statistically significant impacts: Country-specific variables such as the protection of private property rights, market capitalization to GDP, bank claims to GDP, the number of branches and ATMS relative to the population, the presence of government-owned and foreign-owned banks and concentration. Positive impacts: Higher size and lower loan activity. Not significant: Capitalization, profitability and expenses relative to assets. |
| 44 | TE and PTE. | Intermediation approach. | Fixed assets, deposits and staff expenses. | Do not apply. | Investment, net loans and fees. | Size, bank asset concentration, leverage, loan loss provisions to Loans (LLP), ratio of loans to TA (LOTA) and ROA | TE: size, LLP and LOTA negatively impacted efficiency, whereas other variables were not statistically significant. PTE: size, LLP and LOTA negatively impacted efficiency, whereas other variables were not statistically significant. |
| 40 | TE e PTE. | Intermediation approach. | Number of employees, purchased funds and costumer deposits. | Do not apply. | Costumer loans, other loans and securities. | ROA, COA, city, size, branches, age and the ratio of non-performing loans to customer loans. | TE: ROA, size and city positively impacted efficiency, whereas the number of branches and age (number of years the bank existed before 2009) negatively impacted. PTE: ROA had a positive impact, number of branches and age had a negative impact, whereas other variables were not statistically significant. |
| 22 | Not identified. | Not identified. | Employees, assets and net assets. | Deposits, loans, income and interest income. | Net interest income, net service income and profit. | Weight of shares held by the top 5 shareholders, the weight of shares held by the foreign strategic shareholders, the real GDP and the CPI. | The 3 market power proxies and CPI positively impacted efficiency, whereas other variables were not statistically significant. |
| 2 | PTE. | Not identified. | Personnel expenses, branch space, other expenses and risk index. | Do not apply. | Comissions, deposits and loans. | Two agency-specific variables: public transportation and automatic teller frequency. Other variables: potential costumers and competitive environment. | No significant impact was found. |
| 15 | TE and PTE. | Not identified. | Number of operational staff, number of business personnel, branch office rent and operating expenses. | Do not apply. | Net interest spread income and net fee income. | Two variables related to external economic environment: Real GDP growth and Consumer Price Index (CPI). Three agency-specific variables: branch floor area, years of operation, and loan amount. | The impact analysed is not in the efficiency index but in the slacks of the inputs. |
| 58 | Not identified. | Operational efficiency and market efficiency (2 nd stage). | Net asset, total asset and employees. | Deposits, loans and service income. | Net income, ROA and ROE. | Two foreign capital participation proxies. Control variables: capital structure, real GDP, money supply growth rate, and bank loans’ weight in the total capital formation. Dummy for private or state-owned and the percentage of employees with a diploma. | Market efficiency: Positively impacted: foreign ownership, money supply growth rate. Negatively impacted: real GDP. Other variables were not statistically significant. |
| 42 | Not identified. | Production approach. | : Total costs, : employee costs. | Do not apply. | : total deposits, : income before tax, : total credit. | Control Variables (5): price of labour, price of capital, price of deposits, trend, market-share. Contextual Variables (5): foreign ownership, government ownership, M&A, IFRS accounting policy and Active dividend policy. | Foreign ownership, government ownership, recent M& A, active dividend policy, and trend were not statistically significant. Price of deposits, price of labour, IFRS accounting principles, and market-share were significant, and the relationship (positive or negative) with efficiency depends on the reliability of input and output variables. |
| 1 | PTE. | Production approach. | Number of employees, equity and total asset. | Profit and revenue. | Market value, earning per shares (EPS) and stock price. | Bank’s location. | There was no relevant impact of the location of the bank in the efficiency. |
| 41 | PTE. | Production approach. | 17 variables related to banking activity. | Do not apply. | 17 variables. | Foreign ownership, government ownership, recent M&A and Same General Accepted Accounting Principles. | Impact on the virtual efficiency of M&A: Foreign ownership, government ownership and same accounting principles positively impacted efficiency. Recent M&A was not statistically significant. |
| 53 | TE and PTE. | Production approach. | (8): Reserves for Impaired loans, equity, impaired loans, operational cost, personnel expenses, number of employees, number of branches and depreciation. | Do not apply. | (8): Total assets, fixed assets, gross loans, total securities, total customer deposits, pre-tax profit, net interest income and total non-interest operating income. | (8): 1. Listed in stock market; 2. Foreign bank; 3. Big bank; 4. Tier 1 Ratio; 5. Total Capital Ratio; 6. Interest Expense on Customer Deposits/Average Customer Deposits; 7. National/Regional; and 8. Cost of deposits. | Being national and listed in the stock market increase the likelihood of a bank being efficient, whereas (3) whether the bank is big or not; (4) Tier 1 ratio; (5) total capital ratio; and (6) relative interest expense on customer deposits decrease that likelihood. |
| 52 | TE | Production approach (1st stage) and intermediation (2nd stage). | Employees, fixed assets and operational expenses. | Deposits and loans. | Interest income and non interest income. | Trend, Trend2, commercial, local. | Gains from M&A are likely to be higher when the two banks are commercial and smaller and when banks are local. |
| 43 | PTE. | Profit approach. | Operational expenses and loan loss provisions. | Do not apply. | Fee and Income. | Two agency-specific variables: Diversification (DIV) and ratio of loans to deposits (LD). Four control variables: Return on capital (ROC), size, Location1 and Location2. | DIV, ROC and Location1 positively impacted efficiency, whereas LD, size and Location2 negatively impacted efficiency. |
| 54 | TE. | Profit approach. | Total interest expenses and non-interest expenses. | Do not apply. | Aggregated net income. | Ratio of other earning assets over loans (OEA/L), ratio of other earning assets over total earning assets (OEA/TEA), ratio of non earning assets/total assets (NEA/TA) and ratio of deposits to loans. | Negative impact: OEA/L and OEA/TEA. Positive impact: NEA/TA, ratio of deposits to loans. |
| 55 | TE. | Profit approach. | Operating expenses and interest expenses. | Do not apply. | Total income. | Bank-specific factors: Capitalization, liquidity, risk, profitability, credit risk and asset quality proxy and size. Macro-environmental variables: annual GDP growth rate and current period inflation. | Positively impacted: capitalization, profitability, size and GDP. Negatively impacted: liquidity risk, credit risk and asset quality proxy and inflation. |
The authors defined this variable as intermediation cost to total assets.
Ratio of priority sector advances (i.e., directed credit) to total assets. and priority.
Total Factor Productivity Chance, calculated by Malmquist index.
In a simplified way, the authors examined whether banks are operating similarly due to Gulf Council measures.
Analysed by statistical tests, e.g., ANOVA, KruskalWallis.
Calculated as the sum of interest income and non interest income.
The authors did not analyse the impact in efficiency per se, but rather the probability of a bank being efficient, taking into account environmental variables.