Good Management in Banking

42 Pages Posted: 21 Feb 2018

See all articles by Manthos D. Delis

Manthos D. Delis

Montpellier Business School

Maria Iosifidi

University of Surrey - Surrey Business School

Efthymios G. Tsionas

Lancaster University

Date Written: February 10, 2018

Abstract

We present and estimate a model of management practices as technology of the banking firm. Management is an unobserved (latent) input in the production function of banks, which we estimate at the bank-quarter level using data for all U.S. banks from 1984 to 2016 and Bayesian techniques. We show that management practices are, next to deposits funding, the most important input in the banks’ production process, explaining an important part of bank performance and risk. We validate our approach using repeated random sampling (Monte Carlo simulation) within a rather unfavorable environment. Our model can be considered as benchmark to robustly estimate good management practices, to analyze their sources, and to establish good management as an important determinant of efficient and sound banking.

Keywords: Banking, Management Practices, Cost Function, Bayesian Methods, Monte Carlo Simulation

JEL Classification: G30, G21, L22, M10

Suggested Citation

Delis, Manthos D. and Iosifidi, Maria and Tsionas, Efthymios G., Good Management in Banking (February 10, 2018). Available at SSRN: https://ssrn.com/abstract=3121551 or http://dx.doi.org/10.2139/ssrn.3121551

Manthos D. Delis (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Maria Iosifidi

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 8DN
United Kingdom

Efthymios G. Tsionas

Lancaster University ( email )

Lancaster LA1 4YX
United Kingdom

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