Abstract
Quarterly call report data for 225 banks over twenty-six quarters are used to estimate a quadratic cost function to provide a measure of technological change within the banking industry. The nature of the relationship between technological change and bank performance is then examined. A logit model is formulated to estimate the likelihood that banks will display a positive level of technological development.
Return on assets and return on equity are selected as measures of banking performance. The results suggest that technological change is significantly related to over-all banking performance. Finally, a significant relationship is indicated between bank size and profitability and the rate at which banks implement technological change.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Bell, Frederick and Neil Murphy. Cost in Commercial Banking: A Quantitative Analysis of Bank Behavior and its Relation to Bank Regulation. Research Report No. 41. Boston: Federal Reserve Bank of Boston, 1968.
Benston, George. “Branch Banking and Economies of Scale”Journal of Finance 20 (May 1965) pp. 312–331.
Berndt, Ernst, The Practice of Econometrics. Addison-Wesley Publishing Company, (1991) New York: pp. 95.
Clark, Jeffery, “Estimation of Economies of Scale in Banking Using a Generalized Functional Form,”Journal of Money, Credit and Banking 16 (February 1984) pp.53–68.
Clark, Jeffery and Paul Speaker. “The Impact of Entry Conditions on the Concentration-Profitability Relationship in Banking,”Quarterly Review of Economics and Finance (Winter 1992), pp. 45–64.
Clark, Jeffery and Paul Speaker, “Economies of Scale and Scope in Banking: Evidenced from a Generalized Translog Cost Function,”Quarterly Journal of Business and Economics (Spring 1994), pp. 3–23.
Hannan, T.H. and J.M. McDowell, “Market Concentration and the Diffusion of New Technology in the Banking Industry,”Review of Economics and Statistics (November 1984), pp. 686–691.
Humphrey, David, “Cost Dispersion and the Measurement of Cost Economies in Banking,”Economic Review (May/June 1987) pp. 24–38, Federal Reserve Bank of Richmond.
Hunter, W.C. and S.G. Timme, “Technological Change, Organizational Form, and the Structure of Bank Production,”Journal of Money, Credit and Banking (May 1986), pp. 152–166.
Hunter, W.C. and S.G. Timme, “Technological Change in Large U.S. Commercial Banks.”Journal of Business (July 1991), pp. 339–361.
Mester, L., “Traditional and Nontraditional Banking: An Information-Theoretical Approach”,Journal of Banking and Finance (May 1992), pp. 545–566.
Pulley, Lawrence and Yale Braunstein, “A Composite Cost Function for Multiproduct Firms With An Application to Economies of Scope in Banking,”Review of Economics and Statistics (May 1992), pp. 221–230.
Shaffer, Sherril and Edmond David. “Economies of Superscale in Commercial Banking,”Applied Economics 23 (May 1991) pp. 283–293.
Stevenson, Rodney, “Measuring Technological Bias,”American Economics Review (March 1980), pp. 162–173.
Webster, Allen. “The Impact of Bank Performance on Managerial Compensation,”The Journal of Retail Banking (Fall 1995), pp. 3–16.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Webster, A.L. The impact of technological change on bank performance. J Econ Finance 21, 41–47 (1997). https://doi.org/10.1007/BF02929037
Issue Date:
DOI: https://doi.org/10.1007/BF02929037