Problem Loans and Cost Efficiency in Commercial Banks (1997)
| Venue: | Journal of Banking and Finance |
| Citations: | 112 - 6 self |
BibTeX
@INPROCEEDINGS{Berger97problemloans,
author = {Allen N. Berger and Robert Deyoung},
title = {Problem Loans and Cost Efficiency in Commercial Banks},
booktitle = {Journal of Banking and Finance},
year = {1997},
pages = {849--870}
}
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Abstract
: This paper addresses a little examined intersection between the problem loan literature and the bank efficiency literature. We employ Granger-causality techniques to test four hypotheses regarding the relationships among loan quality, cost efficiency, and bank capital. The data suggest that problem loans precede reductions in measured cost efficiency; that measured cost efficiency precedes reductions in problem loans; and that reductions in capital at thinly capitalized banks precede increases in problem loans. Hence, cost efficiency may be an important indicator of future problem loans and problem banks. Our results are ambiguous concerning whether or not researchers should control for problem loans in efficiency estimation. JEL Code: G21, G28 Key Words: Commercial Banks, Cost Efficiency, Loan Quality, Granger-causality. _____________________________________________________________________________________________ The authors thank Bob Avery, Paul Bauer, George Benston, James Burg...
Keyphrases
problem loan cost efficiency commercial bank loan quality cost efficiency precedes reduction problem loan literature bank efficiency literature problem bank george benston measured cost efficiency paul bauer granger-causality technique little examined intersection efficiency estimation bank capital future problem loan bob avery data suggest capitalized bank g28 key word james burg jel code important indicator
