Title :

Decomposing banking performance into economic and credit risk efficiencies

Author(s) :

Boussemart, Jean Philippe [Auteur]
Lille économie management - UMR 9221 [LEM]
Leleu, Herve [Auteur]
Université Catholique de Lille - Faculté de gestion, économie et sciences [UCL FGES]
Lille économie management - UMR 9221 [LEM]
Shen, Zhiyang [Auteur]
Vardanyan, Michael [Auteur]
Lille économie management - UMR 9221 [LEM]
Zhu, Ning [Auteur]

Journal title :

European Journal of Operational Research

Pages :

719-726

Publisher :

Elsevier

Publication date :

2019-09-01

ISSN :

0377-2217

English keyword(s) :

Data Envelopment Analysis
Credit risk
Economic efficiency
Banking performance
Non-performing loans

HAL domain(s) :

Sciences de l'Homme et Société/Economies et finances

English abstract : [en]

This paper proposes a non-parametric approach of a banking production technology that decomposes performance into economic and credit risk efficiencies. The basis of our approach is to separate the production technology ...
Show more >This paper proposes a non-parametric approach of a banking production technology that decomposes performance into economic and credit risk efficiencies. The basis of our approach is to separate the production technology into two sub-technologies. The former is the production of non-interest income and loans from a set of traditional inputs. The latter is attached to the production of interest income from loans where an explicit distinction between good and non-performing loans is introduced. Economic efficiency comes from the production of good outputs, namely interest and non-interest income, while credit risk management efficiency is related to the minimization of the non-performing loans that can be considered as an unintended or bad output. The model is applied to Chinese financial data covering 30 banks from 2005 to 2012 and different scenarios are considered. The results indicate that income could be increased by an average rate of 16% while non-performing loans could be decreased by an average rate of 33%. According to our results, banking managers could strike a balance between economic performance and credit risk management and make more appropriate decisions in line with their preferences.Show less >

Language :

Anglais

Popular science :

Non

Collections :

• Lille Économie Management (LEM) - UMR 9221

Source :

Harvested from HAL