The effect of geographic expansion on the productivity of Spanish savings banks

Abstract

This article analyzes the effects of geographic expansion of Spanish savings banks on productivity. The study is performed using data from 1992 to 2001, as this is the period when most savings banks expanded geographically. In order to do this, we consider an alternative approach to most multi-stage studies, which use nonparametric methods both to measure productivity growth and to analyze its relationship with branch office expansion. Specifically, we use nonparametric regression techniques and their natural complement, conditional density estimation, which have not been much used by economists. The results—within a context of generalized productivity gains, primarily stemming from shifting the efficiency frontier—indicate that savings banks that expand geographically outside their natural markets experience greater productivity gains. In contrast, those expanding on a nationwide basis, or those that confine their territorial expansions to their traditional markets only experience smaller productivity growth.