Should we Abandon the Intermediation Approach for Analyzing Banking Performance?

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

Cahiers de recherche from Departement d'Economique de la Faculte d'administration à l'Universite 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: G21 D24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-eff
Date: 2007
View citations in EconPapers

Downloads: (external link)
http://pages.usherbrooke.ca/gredi/wpapers/GREDI-0701.pdf First version, 2007 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

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

Access Statistics for this paper

More papers in Cahiers de recherche from Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke
Contact information at EDIRC.
Series data maintained by Luc Savard ().