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Financial center productivity and innovation prior to and during the financial crisis

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Abstract

This paper assesses and tests the response of banks operating in financial centers to the financial crisis by investigating the actual productivity change and its components—pure efficiency change, scale efficiency change and technological change (innovation). The heterogeneity in the organizational form and size of banks has been represented with the Aggregated Malmquist Productivity Index (Zelenyuk in Eur J Oper Res 174:1076–1086, 2006) and the bootstrap techniques (Simar and Wilson in Eur J Oper Res 115:459–471, 1999) extended to this index. Our findings indicate that both branch and subsidiary banks respond to the financial crisis with productivity improvements and, in both cases, this improvement is driven primarily by a positive technical change. However, the branch banks outperform the subsidiary banks. In addition, for the three categories of big, medium and small banks, we find a positive productivity reaction to the crisis, driven by a technical change. However, because small banks not only respond to the financial crisis with improvements in the technical change but also in the scale efficiency change, they appear to reach a higher productivity growth, compared with larger banks, as a response to the financial crisis.

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Notes

  1. In the Luxembourg financial center, only four banks operated throughout 1995–2010, six banks disappeared over time, and three banks entered between 2006 and 2007.

  2. In the untabulated estimation, we have conducted all of the analyses restricting the sample to include only foreign subsidiary banks and obtained results similar to those with the full sample.

  3. As noted by Guarda and Roubah (2009).

  4. The only exception is in the scale efficiency change for the years 1999–2000 (the consolidation boom period).

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Acknowledgments

The authors are grateful for the comments received from Subal C. Kumbhakar, Robin C. Sickles and all participants in the Conference in Memory of Lennart Hjalmarsson, Gothenburg, December 7–8, 2012. We would like to thank two anonymous referees and Valentin Zelenyuk for their valuable comments. Claudia Curi gratefully acknowledges the financial support from the Luxembourg Fonds National de la Recherche (through the PERFILUX project), the Central Bank of Luxembourg, where this research first took shape, and the Faculty of Economics and Management, Free University of Bozen-Bolzano (through the TECHBANK project). Ana Lozano-Vivas gratefully acknowledges the financial support from the Spanish Ministry of Economy and Competitiveness (project ECO2011-26996). Any remaining errors are solely our responsibility.

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Authors and Affiliations

  1. Faculty of Economics and Management, Free University of Bolzano-Bozen, Bolzano, Italy

    Claudia Curi

  2. University of Málaga, Málaga, Spain

    Ana Lozano-Vivas

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  1. Claudia Curi
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  2. Ana Lozano-Vivas
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Correspondence to Claudia Curi.

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Curi, C., Lozano-Vivas, A. Financial center productivity and innovation prior to and during the financial crisis. J Prod Anal 43, 351–365 (2015). https://doi.org/10.1007/s11123-015-0434-2

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  • DOI: https://doi.org/10.1007/s11123-015-0434-2

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