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Does it pay off to invest in bank staff training? Survey‐based evidence from an emerging market banking sector

Does it pay off to invest in bank staff training? Survey‐based evidence from an emerging market... We explore the role of staff training and experience for banks' efficiency and profitability, while accounting for size, solvency, liquidity and business model of the banking sector. We try answering two questions: (i) are banks with higher levels of staff training and experience more efficient and profitable and (ii) do banks that spend more to increase the quality of their staff have better outcomes in terms of NPLs, in case of a downturn? We use two novel sources of microdata from a one‐off survey about banks' HR policies and a database on banks' balance sheets and P&Ls regarding the Romanian banking sector. We apply the Data Envelopment Analysis (DEA) approach to estimate production frontiers and rank banks by cost and income efficiency. Our main findings support the conclusion that it pays off to invest more in the quality of bank staff, from both risk management and revenue efficiency perspectives. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economics of Transition and Institutional Change Wiley

Does it pay off to invest in bank staff training? Survey‐based evidence from an emerging market banking sector

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Publisher
Wiley
Copyright
© 2023 European Bank for Reconstruction and Development.
ISSN
2577-6975
eISSN
2577-6983
DOI
10.1111/ecot.12366
Publisher site
See Article on Publisher Site

Abstract

We explore the role of staff training and experience for banks' efficiency and profitability, while accounting for size, solvency, liquidity and business model of the banking sector. We try answering two questions: (i) are banks with higher levels of staff training and experience more efficient and profitable and (ii) do banks that spend more to increase the quality of their staff have better outcomes in terms of NPLs, in case of a downturn? We use two novel sources of microdata from a one‐off survey about banks' HR policies and a database on banks' balance sheets and P&Ls regarding the Romanian banking sector. We apply the Data Envelopment Analysis (DEA) approach to estimate production frontiers and rank banks by cost and income efficiency. Our main findings support the conclusion that it pays off to invest more in the quality of bank staff, from both risk management and revenue efficiency perspectives.

Journal

Economics of Transition and Institutional Change – Wiley

Published: Oct 1, 2023

Keywords: banking sector; cost and revenue efficiency; emerging Europe; financial stability; microdata; survey; training policy

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