Management estimation in banking
Manthos Delis (),
Maria Iosifidi and
European Journal of Operational Research, 2020, vol. 284, issue 1, 355-372
We present and estimate a model of management practices as an unobserved (latent) input in a standard production function of banks. We derive estimates of management at the bank-quarter level, using data for all U.S. banks from 1984 to 2016 and Bayesian techniques. We show that management practices are an important missing input in banks’ operational processes. We validate our approach using repeated random sampling (Monte Carlo simulation) within a rather unfavorable environment. We also show that management is highly correlated with bank profitability (positively) and the probability of default (negatively). Our new measure compares favorably with existing measures of management derived from the residual of the regression of frontier efficiency on bank characteristics that are beyond management's capacity to change. Our model can be considered a benchmark to estimate good management practices, to analyze their sources, and to establish good management as an important determinant of efficient and sound banking.
Keywords: OR in banking; Management practices; Cost function; Bayesian methods; Monte Carlo simulation (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:284:y:2020:i:1:p:355-372
Access Statistics for this article
European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati
More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().