This study investigates the role of risk in determining the cost efficiency of international banks in eight emerging Asian countries. Researchers of this paper consider three distinct risk aspects under a total of eight risk measures: credit risk, operational risk, and market risk. We apply a heteroscedastic stochastic frontier model to estimate bank cost efficiency in our analysis. Additionally, this study analyzes the marginal effects of all risk measures on the inefficiency effect in order to explore a more detailed relationship between risks and efficiency. The empirical results indicate that the risk measures represent significant effects on both the level and variability of bank efficiency. We also find that these effects vary across countries and over time.

Hong and Kacperczyk (2010) document that decreases in analyst competition due to broker mergers encourage analysts to please managers, leading to greater consensus optimism bias. We propose three additional effects of analyst competition. The analyst effort hypothesis suggests that weaker competition reduces analysts’ incentives to collect and analyze information. The herding hypothesis argues that weaker competition reduces analysts’ career concerns, which in turn reduces herding incentives. The strategic deviation hypothesis implies that weaker competition alleviates analysts’ incentives to strategically deviate from others. We find that after broker mergers, analysts follow fewer firms and switch their coverage from firms with more to those with less R&D expenses. They weigh their private information less when it is unfavorable. At the same time, their forecasts become more dispersed. All these findings appear to be more consistent with the analyst effort hypothesis than the herding or strategic deviation hypothesis.

This study investigates the sources of bank productivity growth in China over the period 2002–2009. In order to perform this research, we propose an advanced index – input slack-based productivity index (ISP) – a model that disaggregates total factor productivity growth into each input productivity change. Funds, capital, and employees are chosen as the inputs, whereas loans and other earning assets are outputs in this study. Our results show that technological gains transcend the efficiency regressions and result in total factor productivity growth. More specifically, technical progress in capital productivity reveals the dominant force behind the total factor technical change and productivity improvement. In addition, this paper uses these disaggregation terms to find out the competitive advantages and disadvantages of input usages for each Chinese bank. These findings indicate that the ISP index provides more insights than traditional total factor productivity indices.