What Drives Profitability: Level or Growth Efficiency?

Misra, Biswa Swarup and Sahoo, Biresh (2024): What Drives Profitability: Level or Growth Efficiency?

Abstract

Examining the impact of ratio-based efficiency metrics, such as cost-to-income-ratio, and multifactor-based level efficiency on profitability can be potentially misleading. Our examination of Indian banks spanning the period from 2006 to 2023 reveals that profitability is significantly influenced by multifactor-based growth efficiency, rather than level efficiency. Notably, this finding remains robust when using either conventional or risk-adjusted measure of market power.

• Item Type: MPRA Paper
• Language: English
• Keywords: Profitability; Level efficiency; Growth efficiency; Lerner index; Indian banking
• Subjects: D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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