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The output and profit contribution of information technology and advertising investments in banks

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  • Martín-Oliver, Alfredo
  • Salas-Fumás, Vicente

Abstract

This paper examines the contribution of investments in Information Technology (IT) and in advertising to the output and profits of Spanish banks, in the period 1983-2003. We find that the growth in the stock of IT capital explains one third of output growth of banks, and that an additional investment in IT of one million euros may be substituted for twenty-five workers. The paper also finds that advertising investments increase the demand for bank services with an elasticity of 0.22 for deposits and 0.11 for loans. For all the assets considered, the null hypothesis that banks use the profit-maximizing amount of services per period cannot be rejected with the data.

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  • Martín-Oliver, Alfredo & Salas-Fumás, Vicente, 2008. "The output and profit contribution of information technology and advertising investments in banks," Journal of Financial Intermediation, Elsevier, vol. 17(2), pages 229-255, April.
    • Handle: RePEc:eee:jfinin:v:17:y:2008:i:2:p:229-255
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    3. Claudia M. Buch & Cathérine Tahmee Koch & Michael Kötter, 2009. "Margins of International Banking: Is there a Productivity Pecking Order in Banking, too?," CESifo Working Paper Series 2891, CESifo.
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    5. Raazia Gul & Mamdouh Abdulaziz Saleh Al-Faryan, 2023. "From insights to impact: leveraging data analytics for data-driven decision-making and productivity in banking sector," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-8, December.

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    More about this item

    Keywords

    IT capital Advertising Output growth Rate of return Banks;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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