Incorporating Risk in the Efficiency and Productivity Analysis of Banking Systems

Thomas Weyman-Jones, Miguel Boucinha, Karligash Kenjegalieva, Geetha Ravishankar, Nuno Ribeiro and Zhi Shen

Chapter 5 in New Issues in Financial Institutions Management, 2010, pp 91-105 from Palgrave Macmillan

Abstract: Abstract Among the many impacts of the credit crunch will be the necessity for economists to find a reformulation of models for performance measurement in banks. One of the most important issues to address is how to include risk in the measurement of the performance of banking systems. In this contribution, we review three different approaches to the incorporation of risk in measuring the efficiency and productivity performance of banking systems: the use of equity capital as an explanatory variable, the role of scale efficiency change as an indicator of risky behaviour and, finally, the use of second moment statistics to measure risk. The first two approaches can be regarded as indirect measures of risk in contrast to the third, which is a direct measure of it. We illustrate this with empirical work from Boucinha et al. (2009); Kenjegalieva and Weyman-Jones (2009) and Shen et al. (2009). We argue that while the direct approach is theoretically superior it faces very challenging and possibly insurmountable empirical problems.

Keywords: Data Envelopment Analysis; Total Factor Productivity; Euro Area; Shadow Price; Equity Capital (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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: https://EconPapers.repec.org/RePEc:pal:pmschp:978-0-230-29915-3_6

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230299153

DOI: 10.1057/9780230299153_6

Access Statistics for this chapter

More chapters in Palgrave Macmillan Studies in Banking and Financial Institutions from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().