What Drives Profitability: Level or Growth Efficiency?

Biswa Swarup Misra and Biresh Sahoo

MPRA Paper from University Library of Munich, Germany

Abstract: Examining the impact of ratio-based efficiency metrics, such as cost-to-income-ratio, and multifactor-based level efficiency on profitability can be potentially misleading. Our examination of Indian banks spanning the period from 2006 to 2023 reveals that profitability is significantly influenced by multifactor-based growth efficiency, rather than level efficiency. Notably, this finding remains robust when using either conventional or risk-adjusted measure of market power.

Keywords: Profitability; Level efficiency; Growth efficiency; Lerner index; Indian banking (search for similar items in EconPapers)
JEL-codes: D24 G21 (search for similar items in EconPapers)
Date: 2024-03-03, Revised 2024-03-05
New Economics Papers: this item is included in nep-ban and nep-eff
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