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Can High-Tech Investments Improve Banking Efficiency?

Author

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  • GIULIANA BORELLO

    (Università degli Studi di Verona, Italy)

  • FRANCESCA PAMPURINI

    (Università Cattolica del Sacro Cuore, Italy)

  • ANNA GRAZIA QUARANTA

    (Università di Macerata, Italy)

Abstract

This study examines the high-tech investment activity of the banking system in the period following the Global Financial Crisis, from 2009 to 2020. To gain an understanding of the effect of the increasing interest of banks in high-tech investments, this research provides evidence of the relationship between the level of efficiency achieved by Euro Area banking groups and their high-tech investment aptitude. This paper is purely exploratory given that, to the best of our knowledge, it is one of the first to address this specific research question. We analyze in detail the association between bank efficiency (measured using a stochastic frontier approach) and different high-tech investment indicators, as well as the direction of this connection to provide an explanation for the relationship. We find a stable and overall significant relationship between banks’ efficiency and their high-tech investment aptitude. Moreover, we find that only medium efficiency banking groups that adopt a more diversified investment acquisition strategy have a positive relationship with high-tech investment aptitude; otherwise, the relationship between bank efficiency and high-tech investment indicators seems to be negative. Regulators should be aware of this bank acceleration in the enhancement of high-tech investment because it can reduce the stability of banking groups and because an increase in intangibles assets (e.g. patents) could also be motivated by an interest rather than an earnings management strategy.

Suggested Citation

  • Giuliana Borello & Francesca Pampurini & Anna Grazia Quaranta, 2022. "Can High-Tech Investments Improve Banking Efficiency?," Journal of Financial Management, Markets and Institutions (JFMMI), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 1-19, June.
    • Handle: RePEc:wsi:jfmmix:v:10:y:2022:i:01:n:s2282717x22500037
    DOI: 10.1142/S2282717X22500037
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    Cited by:

    1. Pampurini, Francesca & Pezzola, Annagiulia & Quaranta, Anna Grazia, 2024. "Lending business models and FinTechs efficiency," Finance Research Letters, Elsevier, vol. 65(C).
    2. Cristina Demma & Giovanni Ferri & Andrea Orame & Valerio Pesic & Valerio Vacca, 2024. "Banks' operational resilience during pandemics," Questioni di Economia e Finanza (Occasional Papers) 833, Bank of Italy, Economic Research and International Relations Area.
    3. Onorato, Grazia & Pampurini, Francesca & Quaranta, Anna Grazia, 2024. "Lending activity efficiency. A comparison between fintech firms and the banking sector," Research in International Business and Finance, Elsevier, vol. 68(C).

    More about this item

    Keywords

    Banking groups; efficiency; cluster analysis; high-tech; patents;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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