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Decomposing total factor productivity while treating for misspecification

Author

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  • Emmanuel Mamatzakis

    (Department of Management, Birkbeck, University of London, UK)

  • Efthymios Tsionas

    (Economic Department, Lancaster University Management School, UK)

Abstract

Decomposing firm performance has been challenging for some time. Yet the importance of accurately measuring performance is unequivocal. We propose a flexible functional of total factor productivity (TFP) that measures firm performance and treats misspecification. We argue that measuring bank productivity at global level, which is provided by our model based on bank micro-foundations, is better suited than other measures. Our results suggest that there is not much convergence in TFP across the world, though the technology has positively contributed to bank TFP growth. However, nonperforming loans have had the opposite effect. Furthermore, we show that bank risk-taking and raising capital by equity are negatively related to TFP growth; instead, liquidity has a positive impact.

Suggested Citation

  • Emmanuel Mamatzakis & Efthymios Tsionas, 2020. "Decomposing total factor productivity while treating for misspecification," Management Working Papers 18, Birkbeck Department of Management, revised Feb 2021.
    • Handle: RePEc:img:manwps:18
    as

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    File URL: https://eprints.bbk.ac.uk/id/eprint/31157/1/31157.pdf
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    References listed on IDEAS

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