Optimal Capacity Utilization and Reallocation in a German Bank Branch Network: Exploring Some Strategic Scenarios

Kristiaan Kerstens (), Bouye Ahmed Moulaye Hachem (), Ignace Van de Woestyne and Niels Vestergaard ()
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Kristiaan Kerstens: CNRS-LEM (UMR 8179), IÉSEG School of Management
Bouye Ahmed Moulaye Hachem: LEM-CNRS and IESEG School of Management
Ignace Van de Woestyne: Hogeschool Universiteit Brussel, Brussels, Belgium

No 2008-ECO-19, Working Papers from IESEG School of Management

Abstract: Quite a few studies have considered efficiency at the bank branch level by comparing mostly a single branch network, while an abundance of studies have focused on comparing banking institutions. However, to the best of our knowledge no study has ever assessed performance at the level of the branch bank network by looking for ways to reallocate resources such that overall performance improves. Here, we introduce the Johansen-Färe measure of plant capacity of the firm into a multi-output, frontier-based version of the short-run Johansen industry model. The first stage capacity model carefully checks for the impact of the convexity assumption on the estimated capacity utilization results. Policy scenarios considered for the short-run Johansen industry model vary in terms of their tolerance with respect to existing bank branch inefficiencies, the formulation of closure policies, the reallocation of labor in terms of integer units, etc. The application to a network of 142 bank branches of a German savings bank in the year 1998 measures their efficiency and capacity utilization and demonstrate that by this industry model approach one can improve the performance of the whole branch network.

Keywords: Bank Branch Network; Efficiency; Capacity; Reallocation (search for similar items in EconPapers)
JEL-codes: G21 M11 (search for similar items in EconPapers)
Date: 2008-12
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