The impact of technological change on bank performance
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Quarterly call report data for 225 banks over twenty-six quarters are used to estimate a quadratic cost function to provide a measure of technological change within the banking industry. The nature of the relationship between technological change and bank performance is then examined. A logit model is formulated to estimate the likelihood that banks will display a positive level of technological development.
Return on assets and return on equity are selected as measures of banking performance. The results suggest that technological change is significantly related to over-all banking performance. Finally, a significant relationship is indicated between bank size and profitability and the rate at which banks implement technological change.
KeywordsCost Function Technological Change Total Asset Banking Industry Technological Advancement
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