Modelling the effect of national culture on multinational banks' performance: A conditional robust nonparametric frontier analysis

a r t i c l e i n f o Most of the efficiency studies of large multinational banks operating in different countries calculate banks' inefficiency levels without taking into account the environmental factors in which they are operating in. As a result the estimated inefficiencies are subject to a combination of true managerial inefficiencies and the impact of environmental factors which most of the time are not appropriately controlled in the analysis. This study by examining 282 multinational banks from 43 different countries calculates the influence of their national culture on their estimated efficiency levels. By using conditional and unconditional robust efficiency estimators this paper provides empirical evidence of how different cultural values influence banks' global practices and thus their performances. The results indicate that there is a cultural pattern that has a positive effect on banks' performance. That is lower masculine, uncertainty avoidance and power distance values and moderate individualistic values. According to the literature the majority of the studies calculating multinational banks' efficiency assume that all banks have a common efficient frontier (Bos and Kool, 2006). In addition the use of such assumption leads to biased efficiency results and thus to misevalu-ation of policy implications (Dietsch and Lozano-Vivas, 2000). As such crosscountry bank efficiency studies must adjust their efficiency measurements towards capturing environmental influences, which usually are beyond the control of management. According to several authors little work has been done on identifying and measuring the environmental factors which affect multinational banks' efficiency levels (Chaffai et al. In a global environment the dynamics and complexities require full collaboration of all operations and production processes within the business in order for the multinational to take advantage of its scale and scope capabilities. Hayes and Thies (1991) suggest that services add more complexity to this complication due to its nature of being labour intensive. In that respect productivity is mostly based upon making the worker more efficient. However, the performance of banks operating in global market place face different challenges when trying to maximising their performances through different production operations management (POM) approaches. Pagell et al. (2005) suggest that national culture is one of the main factors explaining differences in international operational decision making. Similarly, Bendoly et al. (2006) emphasise the fact that national culture can moderate the effects of task interdependence on perceptions of the importance of enterprise resource planning (ERP) communicative capabilities. Based on those lines …