Efficiency of financial institutions: International survey and directions for future research

TLDR

The study aims to summarize and critically review empirical estimates of financial institution efficiency, reach a consensus view, and discuss implications for policy, research, and management. The authors surveyed 130 studies applying frontier efficiency analysis to financial institutions across 21 countries. They found that efficiency methods yield inconsistent results and propose improvements for consistency, accuracy, and usefulness, while outlining areas for further research.

Abstract

This paper surveys 130 studies that apply frontier efficiency analysis to financial institutions in 21 countries. The primary goals are to summarize and critically review empirical estimates of financial institution efficiency and to attempt to arrive at a consensus view. We find that the various efficiency methods do not necessarily yield consistent results and suggest some ways that these methods might be improved to bring about findings that are more consistent, accurate, and useful. Secondary goals are to address the implications of efficiency results for financial institutions in the areas of government policy, research, and managerial performance. Areas needing additional research are also outlined.