Cost efficiency impact of bank branch characteristics and location: An illustrative application to Greek bank branches

Abstract

Purpose

The purpose of this study is to examine the operating efficiency of a set of 171 retail orientation bank branches of a large commercial bank in Greece, offering relatively homogenous products in a multimarket business environment.

Design/methodology/approach

For the measurement of the indices of efficiency the internationally known method of data envelopment analysis (DEA) was used. Two semi‐parametrical statistical tests and one additional Kolmogorov–Smirnov test (non‐parametric) were conducted to choose the appropriate DEA model for the analysis. Using regression analysis, the paper also seeks to examine the effects of selected branch characteristics (profitability, size, market power) and location to variations on operating efficiency.

Findings

The results indicate the scope for substantial efficiency improvements. It is also observed that, within the branch characteristics variable, more profitable and larger branches have higher operating efficiency. Finally, holding profitability and branch size constant the analysis showed that rural branches tend on average to be more efficient than urban branches.

Originality/value

The paper examines the operating efficiency of bank branches of a large commercial bank in Greece.

Citation

Giokas, D.I. (2008), "Cost efficiency impact of bank branch characteristics and location: An illustrative application to Greek bank branches", Managerial Finance, Vol. 34 No. 3, pp. 172-185. https://doi.org/10.1108/03074350810848054