Evaluating the financial performance of bank branches

Evaluating the financial performance of bank branches

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Article ID: iaor20071889
Country: Germany
Volume: 145
Issue: 1
Start Page Number: 321
End Page Number: 337
Publication Date: Jul 2006
Journal: Annals of Operations Research
Authors: , ,
Keywords: statistics: data envelopment analysis, performance
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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