Online banking applications and community bank performance

Purpose – The purpose of this paper is to examine the impact of online banking intensity on the financial performance of community banks.Design/methodology/approach – This study estimates online banking intensity and bank performance indices using a combination of primary and secondary data. Online banking intensity is specified as a latent construct and estimated using web feature data collected from bank websites. An empirical profit function of a nonstandard Fourier flexible form is estimated using bank's financial data to derive a theoretically consistent performance measure. The actual impact of online banking on performance is measured by regressing the profit efficiency index against a number of correlates including online banking intensity measure.Findings – Study results indicate that the increasing use of internet as an additional channel of marketing banking services has significantly improved the financial performance of community banks.Practical implications – These results show that online b...

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