| This dissertation consists of three independent essays on the efficiency of the relationship lending managers during the period 1990 to 1995, at the Canadian Imperial Bank of Commerce, one of Canada's largest banks. Banking efficiency has become an area of great importance to the banks, bank regulators and researchers as the industry adjusts to the rapid changes taking place in the global banking environment.The first essay employs both parametric and nonparametric techniques to investigate the relationships between efficiency, measures of loan portfolio size, and a risk proxy. The results indicate some factors which ought to influence bank policy with respect to the allocation of loans across portfolio managers. Additional findings from the profit based model, suggest that: (i) the efficiency of a relationship manager will be adversely affected by having too many loans in his portfolio or additional risk (ii) scale efficiency measures of banks ought to include both the number of instruments in the portfolio and the dollar value (iii) averages of the efficiency measures obtained using data envelopment analysis do not differ substantially from standard econometric measures.The second essay, by means of a diagram and simple examples, explains the workings of data envelopment analysis, a linear programming approach to estimating efficiency frontiers. There are some special problems in applying the technique to financial data which are not widely understood by researchers in the finance area. The problems are detailed and as a particular case in point, the essay explains why some of the claims made by Stephen Miller and Athanasios Noulas in their paper, `The technical efficiency of large bank production' (Journal of Banking and Finance 20, 1996, 495--509) require cautious interpretation.The third essay describes the operating environment faced by relationship lending managers over the 1990 to 1995 period and explores some of the time-series properties of the relationship managers' efficiency levels using a combination of regression techniques and an extended version of the data envelopment analysis approach. The findings indicate that banks may increase profitability by reconsidering the use of the relationship lending approach for smaller loans. |
