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Title:Does IT standardization help to boost cost and profit efficiency? Empirical evidence from German savings banks PDF Logo
Authors:Noth, Felix
Slotty, Constantin
Hackethal, Andreas
Issue Date:2009
Series/Report no.:Working paper series // Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften Finance & accounting 204
Abstract:This paper investigates the impact of IT standardization on bank performance based on a panel of 457 German savings banks over the period from 1996 to 2006. We measure IT standardization as the fraction of IT expenses for centralized services over banks' total IT expenses. Bank efficiency, in turn, is measured by traditional accounting performance indicators as well as by cost and profit efficiencies that are estimated by a stochastic frontier approach. Our results suggest that IT standardization is conducive to cost efficiency. The relation is positive and robust for small and medium-sized banks but vanishes for very large banks. Furthermore, our study confirms the often cited computer paradox by showing that total IT expenditures negatively impact cost efficiency and have no influence on bank profits. To the best of our knowledge, this paper is first to empirically explore whether IT standardization enhances efficiency by employing genuine data of banks' IT expenditures.
Subjects:IT standardization
cost and profit efficiency
savings banks
JEL:C23
G21
Document Type:Working Paper
Appears in Collections:Working Paper Series: Finance and Accounting, Universität Frankfurt a. M.

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