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The effect of building society demutualisation on levels of efficiency at large UK commercial banks

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  • Robert Webb
  • Cormac Bryce
  • Duncan Watson

Abstract

Purpose - This paper aims to investigate the effect of UK building society demutualisation on levels of efficiency at the largest five commercial banks in the UK. Design/methodology/approach - This research utilises data envelopment analysis (DEA) within a rarely adopted windows framework to analyse efficiency. The study also incorporates a novel risk proxy in the profit‐orientated approach to determine DEA input/output which proves a useful innovation to the methodology. Findings - The overall aggregate results suggest that converting building societies outperformed their bank counterparts in all areas of efficiency and that scale efficiency dominates pure technical efficiency. Interestingly, the results also indicate that the level at which institutions continue to find economies of scale had increased when compared to previous research. Originality/value - The period of building society demutualisation offers an empirical opportunity to examine deregulation upon market participants. It is felt that this study offers academics, regulators and participants within the financial services environment an insight into the efficiency impact of deregulation.

Suggested Citation

  • Robert Webb & Cormac Bryce & Duncan Watson, 2010. "The effect of building society demutualisation on levels of efficiency at large UK commercial banks," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 18(4), pages 333-355, November.
    • Handle: RePEc:eme:jfrcpp:v:18:y:2010:i:4:p:333-355
    DOI: 10.1108/13581981011093668
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    References listed on IDEAS

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    Cited by:

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    2. Jamal Ouenniche & Skarleth Carrales, 2018. "Assessing efficiency profiles of UK commercial banks: a DEA analysis with regression-based feedback," Annals of Operations Research, Springer, vol. 266(1), pages 551-587, July.
    3. Bryce, Cormac & Webb, Rob & Cheevers, Carly & Ring, P. & Clark, G., 2016. "Should the insurance industry be banking on risk escalation for solvency II?," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 131-139.
    4. Bryce, Cormac & Cheevers, Carly & Webb, Rob, 2013. "Operational risk escalation: An empirical analysis of UK call centres," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 298-307.

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