Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Data Collection As an industry expert in banking, you have access to data on Able's competitors. You have compiled data on the non-interest expenses of

Data Collection

As an industry expert in banking, you have access to data on Able's competitors. You have compiled data on the non-interest expenses of 64 competitors with total assets between 300 and 700 million dollars. This data is provided the bankdatafall2020.xlsx file in BlackBoard. The first tab titled "NonInterest Exp" includes non-interest cost and loan data, in thousands of dollars, for the 64 competitors. Additionally, you have gathered ATM expense data for 39 competitors provided in the second table titled (ATM Exp). Since Able is looking to cut labor costs, they want to get a better idea of what competitors are paying for ATM expenses.

1. Using the data provided in the "NonInterest Exp" tab, estimate the following OLS regression models for each of the three different types of expenses: wage expense, fixed asset expenses, and total non-interest expenses (i.e. run three different regressions).

Expense = + 1*R.E. Loans + 2*Pers. Loans + 3*Small Bus. Loans +

2. Interpret the coefficients and explanatory power of the models in part1. Which costs are fixed and variable? Does the size and statistical significance of these coefficients seem to match what you would think about the three different types of costs?

3. Estimate the wage and fixed asset expense for a bank with $275 million in real estate loans, $15 million in personal loans, and $80 million in small business loans

4. Able has $350 million in real estate loans, $65 million in small business loans and $12 million in personal loans. Their total wage expense is about $10.8 million. What can you say about the efficiency of their labor cost management practices at Able?

5. Using the data provided in the "ATM Exp" tab, estimate the following OLS regression models:

ATM Expense = + 1*R.E. Loans + 2*Pers. Loans + 3*Small Bus. Loans +

ATM Expense = + 1*Total Deposits +

ATM Expense = + 1*Demand Deposits + 2*Savings Deposits

+ 3*TimeDeposits +

6. Interpret the coefficients and explanatory power of the models in part 5. Which model does the best job of explaining ATM costs? Give some intuition as to why you think this is the case (i.e Why are some variables statistically significant while others are not).

7. A member of Able's board believes that Fictious' labor costs are too high relative to the amount of loans they make. He cites a study conducted by a large accounting firm, which included data from banks such as Bank of America and Wells Fargo. Conceptually (without comparing models, etc.), discuss the validity of the board members claim.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Payroll Accounting

Authors: Bernard J. Bieg, Judith Toland

21st Edition

1111531056, 978-1111531058

More Books

Students also viewed these Accounting questions

Question

Describe several uncontrollable factors that impact A&F.

Answered: 1 week ago