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Evaluating the financial performance of bank branches

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Abstract

We evaluate the financial performance of most of the branch offices of a large European savings bank for a recent accounting period. We employ a complementary pair of nonparametric techniques to evaluate their financial performance, in terms of their ability to conserve on the expenses they incur in building their customer bases and providing customer services. We find variation in the ability of branch offices to perform this task, and agreement on the identity of the laggard branches. We then employ parametric techniques to determine that the list of indicators on which their financial performance is evaluated can be reduced without statistically significant loss of information to bank management. Both findings suggest ways in which the bank can increase the profitability of its branch network.

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Authors and Affiliations

  1. Centro de Investigación Operativa, Universidad Miguel Hernández, 03202 Elche, (Alicante), Spain

    Jesús T. Pastor

  2. Department of Economics, University of Georgia, Athens, GA, 30602, USA

    C. A. Knox Lovell

  3. CORE, Université Catholique de Louvain, Voie du Roman Pays,34,, B-1348 Louvain-la-Neuve, Louvain, Belgium

    Henry Tulkens

Authors
  1. Jesús T. Pastor
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  2. C. A. Knox Lovell
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  3. Henry Tulkens
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Corresponding author

Correspondence to C. A. Knox Lovell.

Additional information

A previous version of this paper was presented at CORE, Université Catholique de Louvain, Louvain-la-Neuve, Belgium, where we received many helpful comments from the audience. We are grateful to three referees for their helpful comments as well.

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Pastor, J.T., Lovell, C.A.K. & Tulkens, H. Evaluating the financial performance of bank branches. Ann Oper Res 145, 321–337 (2006). https://doi.org/10.1007/s10479-006-0038-3

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