The role of bank affiliation in bank efficiency: a fuzzy multi-objective data envelopment analysis approach

Do, Duc Trung; Boubaker, Sabri; Do, Trung; Hammami, Helmi; Ly, Kim Cuong

Abstract

This paper examines differences in bank efficiency between banks affiliated with single-bank holding companies and those affiliated with multi-bank holding companies by applying a fuzzy multi-objective two-stage data envelopment analysis technique. Using a sample of U.S. commercial banks covering 1994–2018, the results show that banks affiliated with multi-bank holding companies are more efficient than those affiliated with single-bank holding companies, suggesting that the former takes advantage of their parents’ resources to enhance their efficiency, consistent with the internal capital market theory. They also show that banks with a powerful CEO exhibit lower efficiency than others. Moreover, there is an inverted U shape relationship between multi-bank holding company structure and bank efficiency, suggesting the presence of an optimal number of multi-bank holding subsidiaries that maximizes efficiency.

Citation

Do, D. T., Boubaker, S., Do, T., Hammami, H., & Ly, K. C. (2022). The role of bank affiliation in bank efficiency: a fuzzy multi-objective data envelopment analysis approach. Annals of Operations Research, 311(2), 611-639. https://doi.org/10.1007/s10479-020-03817-z

• Journal Article Type: Article
• Acceptance Date: Sep 25, 2020
• Online Publication Date: Nov 23, 2020
• Publication Date: 2022-04
• Deposit Date: Oct 13, 2020
• Publicly Available Date: Nov 24, 2021
• Journal: Annals of Operations Research
• Print ISSN: 0254-5330
• Electronic ISSN: 1572-9338
• Publisher: Springer Verlag
• Peer Reviewed: Peer Reviewed
• Volume: 311
• Issue: 2
• Pages: 611-639
• DOI: https://doi.org/10.1007/s10479-020-03817-z
• Keywords: Bank holding companies; Bank efficiency; CEO power; Multi-objective programming; Data envelopment analysis JEL classification: G20; G21; G28; C61; C67 2
• Public URL: https://nottingham-repository.worktribe.com/output/4961025
• Publisher URL: https://link.springer.com/article/10.1007/s10479-020-03817-z
• Additional Information: This is a post-peer-review, pre-copyedit version of an article published in Annals of Operations Research. The final authenticated version is available online at: https://link.springer.com/article/10.1007/s10479-020-03817-z.