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Should we Abandon the Intermediation Approach for Analyzing Banking Performance?

Author

Listed:
  • Mario Fortin

    (GREDI, Département d'économique, Université de Sherbrooke)

  • Andre Leclerc

    (Secteur sciences humaines, Université de Moncton, campus d’Edmundston)

Abstract

The intermediation approach considers banks’ liabilities as inputs to produce loans and other banking assets. We show that measures of banking efficiency and productivity are biased when there is an incomplete coverage of assets and liabilities. The bias can be eliminated with a complete coverage, but in this situation we show that banks are necessarily technically efficient. Moreover, the Malmquist decomposition of productivity growth becomes useless. The difficulties identified in this paper question the usefulness of the intermediation approach in assessing banks’ performance.

Suggested Citation

  • Mario Fortin & Andre Leclerc, 2007. "Should we Abandon the Intermediation Approach for Analyzing Banking Performance?," Cahiers de recherche 07-01, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    • Handle: RePEc:shr:wpaper:07-01
    as

    Download full text from publisher

    File URL: http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-0701.pdf
    File Function: First version, 2007
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    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Mamonov, Mikhail & Vernikov, Andrei, 2017. "Bank ownership and cost efficiency: New empirical evidence from Russia," Economic Systems, Elsevier, vol. 41(2), pages 305-319.
    2. Mario Fortin & André Leclerc, 2011. "L’Efficience Des Cooperatives De Services Financiers: Une Analyse De La Contribution Du Milieu," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 82(1), pages 45-62, March.
    3. repec:bof:bofitp:urn:nbn:fi:bof-201508181357 is not listed on IDEAS
    4. Mikhail Mamonov & Andrei Vernikov, 2015. "Bank Ownership And Cost Efficiency In Russia, Revisited," HSE Working papers WP BRP 46/FE/2015, National Research University Higher School of Economics.
    5. Leclerc, André & Fortin, Mario, 2009. "Économies d’échelle et de gamme dans les coopératives de services financiers : une approche non paramétrique (DEA)," L'Actualité Economique, Société Canadienne de Science Economique, vol. 85(3), pages 263-282, septembre.
    6. repec:zbw:bofitp:2015_022 is not listed on IDEAS
    7. Barros, C.P. & Emrouznejad, Ali, 2016. "Assessing productive efficiency of banks using integrated Fuzzy-DEA and bootstrapping: A case of Mozambican banksAuthor-Name: Wanke, Peter," European Journal of Operational Research, Elsevier, vol. 249(1), pages 378-389.
    8. repec:zbw:bofitp:urn:nbn:fi:bof-201508181357 is not listed on IDEAS
    9. Mamonov, Mikhail & Vernikov, Andrei, 2015. "Bank ownership and cost efficiency in Russia, revisited," BOFIT Discussion Papers 22/2015, Bank of Finland Institute for Emerging Economies (BOFIT).
    10. Martin Boďa & Emília Zimková, 2021. "A DEA model for measuring financial intermediation," Economic Change and Restructuring, Springer, vol. 54(2), pages 339-370, May.

    More about this item

    Keywords

    Intermediation approach; efficiency; Malmquist index;
    All these keywords.

    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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