The Relative Efficiency of Banks, Taking into Account a Customer Satisfaction Rating

Abstract

This paper uses customer satisfaction scores generated for a New Zealand wide survey of consumers to augment analysis of bank efficiency, and to achieve greater consistency with shareholder value analysis. It is found that the customer satisfaction score needs to be adjusted for the number of locations (branches) through which customers are served. Once this is done, the extent of divergence in efficiency is significantly reduced, consistent with propositions that a large divergence in efficiency scores should not be sustainable in a competitive market.

Keywords: Banks, Data Envelopment Analysis (DEA), bank customer satisfaction, New Zealand

JEL Classification: D240, G210