IT and Efficiency Analysis in Commercial Banks and Insurance Firms

This research explores the contribution of information technology (IT) and telecommunication investments (COM) to financial institutions over the world. We employ the generalized stochastic rontier approach to measure the cost and profit efficiencies and scope economy for commercial banks in 51 countries and insurance firms in 25 countries. The Tobit model and the multivariate analysis are used test the impacts of IT and COM. Four important findings are listed below. 1) IT improves the cost and profit efficiencies of these two financial institutions uniformly for countries considered. That is, the international productivity paradox of IT does not exist. 2) The impact of IT on the efficiencies for the commercial banks is more significant than that for the insurance firms. 3)The newly developing countries outperform the developed countries in terms of the contribution of COM to the efficiencies. 4) Both banking and insurance markets are not integrated. Several policy implications drawn from these findings.... Mehr