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Cost efficiency in Australian non-bank financial institutions: A non-parametric approach

Worthington, Andrew C. (2000) Cost efficiency in Australian non-bank financial institutions: A non-parametric approach. Accounting and Finance, 40(1), pp. 75-98.

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Abstract

A two-stage procedure is employed to evaluate non-bank financial institution cost efficiency. In the first stage, data envelopment analysis is used to calculate technical, allocative and cost efficiency indices using a sample of two hundred Australian credit unions. The results indicate that a typical credit union’s costs in 1997 were thirty percent above what could be considered efficient on the basis of observed best practice. The major source of overall cost inefficiency would appear to be allocative inefficiency, rather than technical inefficiency. The second stage uses limited dependent variable regression techniques to relate credit union efficiency scores to financial statement information. The results indicate that commercial lending activities, expenditures on information technology and marketing and promotion, the proportion of non-interest income, and association membership are a significant influence on the level of cost efficiency. The results are found to be invariant to alternative model specifications where input prices are first assumed to be different for each credit union and then assumed to be identical across the sample.

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9 citations in Scopus
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ID Code: 2657
Item Type: Journal Article
Keywords: Data envelopment analysis, Technical, allocative and cost efficiency, Credit unions
DOI: 10.1111/1467-629X.00036
ISSN: 0810-5391
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Financial Economics (140207)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BANKING FINANCE AND INVESTMENT (150200) > Financial Institutions (incl. Banking) (150203)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2000 Blackwell Publishing
Copyright Statement: The definitive version is available at www.blackwell-synergy.com
Deposited On: 24 Nov 2005
Last Modified: 05 Jan 2011 23:26

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