Investigating financial intermediaries’ performance determinants when ‘best practice’ rewards regulatory compliance to reduce bad debt

(J. Colin Glass, Donal G. McKillop and Barry Quinn)

 

 

 

 

 

 

 

 

Abstract

This study employs the Cuesta et al. (2009) translog enhanced hyperbolic distance function model to examine the performance of Irish credit unions. The modeling approach rewards credit unions for reducing undesirable outputs and for increasing desirable outputs and decreasing inputs. A number of findings emerge. First, credit unions are subject to increasing returns to scale with larger credit unions also more efficient than their smaller counterparts. Second, credit unions have secured technical progress via investment in interactive website facilities for product and service delivery. Third, regulatory pressure to reduce bad loans will have a beneficial impact on credit union output and performance.

JEL classification: G21

Keywords: Credit unions, Efficiency, Bad debts

Submitted to Journal of Business, Finance and Accounting April 2010