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Cost and revenue efficiency in Spanish banking: What distributions show

Author

Listed:
  • Mª Pilar García-Alcober

    (Department of Economics and business, Universidad CEU-Cardenal Herrera, Valencia, Spain)

  • Emili Tortosa-Ausina

    (IVIE, Valencia and Department of Economics, Universidad Jaume I, Castellón, Spain)

  • Diego Prior

    (Department of Business, Universitat Autònoma de Barcelona, Spain)

  • Manuel Illueca

    (IVIE, Valencia and Department of Finance and Accounting, Universidad Jaume I, Castellón, Spain)

Abstract
The literature analyzing the efficiency of financial institutions has evolved rapidly over the last twenty years. Most research has focused on the input side, analyzing either cost, input technical efficiency or input allocative efficiency, whereas comparatively fewer studies have examined the revenue side. However, both sides are relevant when evaluating banks' performance. This article explicitly explores how serious it may be to confine the analysis to one side of banks' activities only, comparing the efficiencies yielded by either minimizing costs or maximizing revenues. We focus on the Spanish banking sector, which is currently undergoing a profound process of change and restructuring. The application shows how severely biased the analysis is when only a partial efficiency measurement is conducted. It also shows the growing relevance of the issue since the beginning of the financial crisis.

Suggested Citation

  • Mª Pilar García-Alcober & Emili Tortosa-Ausina & Diego Prior & Manuel Illueca, 2014. "Cost and revenue efficiency in Spanish banking: What distributions show," Working Papers 2014/12, Economics Department, Universitat Jaume I, Castellón (Spain).
    • Handle: RePEc:jau:wpaper:2014/12
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    References listed on IDEAS

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    More about this item

    Keywords

    bank; cost efficiency; revenue efficiency; kernel smoothing;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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