Category: Research

How does web technology adoption affect the performance of Irish credit unions?

Irish credit unions are now entering a period of substantive structural change which will in part be based around technological improvements. One of the conditions of the EU/IMF/ECB financial support package for Ireland was the requirement that credit unions are restructured. A Credit Union Re-Structuring Board was established in 2012 to facilitate amalgamations and the creation of strong ‘anchor’ credit unions capable of developing more sophisticated and more sustainable business models. €250 million has been allocated for this process some of which will be used to enable ‘anchor’ credit unions upgrade their ICT systems.  It was against this back drop, in our forthcoming paper[1], that we assessed the performance implications of web technology adoption in Irish credit unions over the 2002-2010 period.

Here are some key excerpts from the paper.

Figure 1 illustrates a steady increase in web adoption over the period although in 2010 53% of credit unions still did not have a web-based facility.  Further survey evidence from 2010/2011 suggests that these adopters are relatively unsophisticated technological capabilities, with less than 10% offering ATM and or phone banking. This could be related to two factors.  The first is that Irish credit unions have been unable to create a sophisticated integrated technology solution across credit unions and secondly credit unions are constrained by legislation and the regulatory authorities in the range of services that they provide

Figure 1


Figure 2 presents a preliminary visualisation of some performance and cost metrics grouped by whether the credit union has adopted a website or not. The graphical analysis reveals some distinct difference with web adopters experiencing lower spreads on average (driven it seems by lower average loans rates), a marginally higher pay-out ratio and higher average labour and capital expenditures. The latter finding is consistent with the initial encroachment on costs of the adoption of a new technology, while the former finding suggests that credit unions are passing any benefit accrued from this new technology to their membership. The graphical analysis suggests that both saving members and borrowing members benefit but that the majority of the benefit accrues to borrowers.

Figure 2


That said, care must be taken when drawing any causal inference on the effect of adoption from these graphs as to do so infers that the non-adopters and adopters have no other differences other than the adoption of a website.  Using an exhaustive econometric panel data analysis to account for both observable and unobservable difference between adopters and non-adopters, we find consistent statistical evidence of a reduction in spread ( driven by a fall in the loan rate) due to the adoption of web technology.  This effect is persistent over a two and three year period and translates into a cost benefit for borrowing members.

Overall our study highlights that the adoption of a website, even with limited functionality, can provide cost reductions and performance enhancement. This points to the potential of additional benefits accruing from more sophisticated levels of technological advance.  We feel this paper provides timely and important evidence to the Irish credit union sector, which is now entering a period of substantial structural change which is partly base around technological improvement.

1. McKillop, Donal G., and Barry Quinn. 2015. “Web Adoption in Irish Credit unions:Performance Implications.” Annals of Public and Cooperative Economics 86(3).

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

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










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













British Accounting and Finance Association April 2014

In April I attended the BAFA annual conference hosted by the London School of Economics.  My co-author, Barabara Casu (Cass Business School) presented a piece of work on regulatory compliance and bank performance.  We used a unique dataset including Basel Core Principle for effective banking supervision compliance data (BCPs) supplied by the IMF to ascertain if banks’ performance is influenced by compliance with these BCPs.  Using a global sample of banks and modern econometric techniques we find little evidence of an association between compliance and bank operating efficiency, suggestive of the inadequacy of such ‘one size fits all’ banking supervision principles.

Opportunity cost of financial regulation in English football

In collaboration with Ronan Gallagher (University of Edinburgh) I am investigating how financial fair play regulation (henceforth FFP) affects the relative performance of top flight professional football teams in Europe.  Using panel data from on the top two Tiers of English Football, we will use multi-dimensional benchmarking techniques to capture the heterogeneous nature of professional football teams and then retrospectively assess how FFP affect their relative performance.  Our goal is to shed light on the potential opportunity cost of such financial regulation in professional sport team management.

Performance of Irish Credit Unions 2002 to 2010

Modelling the performance of Irish credit unions, 2002-2010

by Professor Colin Glass, Professor Donal McKillop and Barry Quinn


This study employs the Cuesta et al. (2009) translog enhanced hyperbolic distance function to examine the performance of Irish credit unions. The modeling approach rewards credit unions for reducing undesirable outputs (impaired loans and investments) and for increasing desirable outputs and decreasing inputs. A number of findings emerge. Credit unions are subject to increasing returns to scale, technical regression occurred in the years after 2007, there is significant scope for an improvement in technical efficiency through expansion of desirable outputs (18.48%) and contraction of impaired loans and investments and inputs (16.6%) with larger, better capitalised, credit unions identified as more technically efficient. These findings are particularly pertinent given the restructuring proposals for Irish credit unions centred around amalgamations, (see, Irish Commission on Credit Unions, 2012)

Click here for full working paper

Forthcoming  in Financial Accountability and Management in March 2015

Cooperative Banking Efficiency in Japan

Cooperative Bank Efficiency in Japan: A Parametric Distance Function Analysis

J. Colin Glass, Donal G. McKillop, Barry Quinn & John O.S. Wilson


This study employs an extension of the Cuesta et al. (2009) translog enhanced hyperbolic distance function model toexamine the relative performance of Japanese financial cooperatives. The modeling approach rewards financial cooperativesfor reducing undesirable outputs as well as for increasing desirable outputs and decreasing inputs. The empiricalimplementation of the model yields a rich set of results some of which contradict those found elsewhere in the literature.Our analysis finds that, Japanese financial cooperatives are subject to increasing returns to scale; they have securedsignificant levels of technical progress; they have experienced a decrease in technical inefficiency; those financialcooperatives which are larger, more diversified, with a greater proportion of their funds on loan, which have a lower returnon assets and a lower capital adequacy ratio are more efficient and; regulatory pressure to reduce ‘bad’ loans has a substantial adverse impact on output and performance.

JEL classification: G21

Keywords: Japanese Cooperative Banks; Efficiency; Regulatory compliance

Published in the European Journal of Finance 2013 . Click for a copy.

Regulatory Compliance and Bank Efficiency

This project is in collaborating with Sami Ben Naceur (International Monetary Fund Institute), Rym Ayadi(Centre for European Policy Research) and Barbara Casu (Cass Business School).  Using an international sample of commercial banks and Basel Core Principles compliance data (henceforth BCP) supplied by the IMF a non-parametric efficiency analysis applied using modern econometric techniques investigates whether compliance with these BCPs is associated with bank operating efficiency.  This project will produce two pieces of work.  In the first instance a peer-reviewed IMF working paper will be produced by September 2014.  In the second instance a peer-review academic paper will be produced that will target a journal of international standing.

Abstract from IMF working paper

The recent crisis underscored the importance of regulation and supervision that promotes a well-functioning banking system that channels efficiently financial resources into investments,  In this paper, we contribute to the on-going policy debate by assessing whether compliance with international regulatory standard and protocols enchances bank operating efficiency.  We focus specifically on the adoption of international capital standards and the Basel Core Principles for Effective Bank Supervision (BCP). Using an international sample of publicly listed banks the relationship between bank efficiency and regulatory compliance is investigated using the (Simar and Wilson 2007) double bootstrapping approach.