Should we Abandon the Intermediation Approach for Analyzing Banking Performance?

Mario Fortin () and Andre Leclerc ()
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Andre Leclerc: Secteur sciences humaines, Université de Moncton, campus d’Edmundston

Cahiers de recherche from Departement d'économique de l'École de gestion à l'Université de Sherbrooke

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.

Keywords: Intermediation approach; efficiency; Malmquist index (search for similar items in EconPapers)
JEL-codes: D24 G21 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2007
New Economics Papers: this item is included in nep-ban and nep-eff
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:shr:wpaper:07-01

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