intermediation costs in an agricultural development bank a cost function approach to measuring scale economies the cost output relationships and production technology in the agricultural development bank of honduras are analyzed using a translog model scale economies for the average branch are not significantly different from one they are a function of output levels reflecting u shaped cost surfaces product specific economies of scale are substantially different returns to scale of lending activities approach unity whereas there are important unexploited economies to the expansion of deposit mobilization cost complementarities between lending and deposit mobilization indicate advantages of joint provision of financial services over the traditional specialization in lending of agricultural development banks in developing countries

x efficiency in australian banking an empirical investigation this paper empirically investigates the x eaciency technical and allocative in australian banks a non parametric method of data envelopment analysis dea has been used to arrive at the eaciency scores banks in this sample were found to have low levels of overall eaciency compared with the banks in the european countries and in the us the results indicate that as a source of overall ineaciency the technical component was more important than the allocative component thus the ineaciency in australian banks can be attributed to wasting of inputs technical ineaciency rather than choosing the incorrect input combinations allocative ineaciency domestic banks were found to be more eacient than foreign owned banks the study has important implications such as guiding the government policy regarding deregulation and mergers since the study pinpoints the sources of ineaciency it would also help banks with strategic planning 2001 elsevier science b v all rights reserved

mixing and matching prospective financial sector mergers and market valuation abstract which types of mergers are likely to be most productive for banks and other financial firms in the us from a management perspective mixing disparate firms may be difficult but may offer significant gains from diversification the opposite applies to matching similar firms this paper considers life insurance property and casualty insurance securities and commercial firms as potential matches for banks it examines a measure of diversification gains from potential consolidation based on option pricing and a model of the building blocks of the industries based on arbitrage pricing theory the results identify potential diversification gains from virtually all combinations involving banking and insurance which arise because common factors are combined in different ways and because insurance is already well diversified

estimation of economies of scale in banking using a generalized functional form this paper addresses four issues that arise in the estimation of economies of scale in the commercial banking industry first a common assumption underlying many of the studies of economies of scale in banking is the assumption of a cobb douglas production function with exogenous input prices the use of a cobb douglas production function facilitates the estimation of the output elasticity of cost however there does not appear to be any other reason a priori for such an assumption this paper utilizes a box cox hereafter b c generalized functional form methodology to directly test the assumption of an underlying cobb douglas production function second if the assumption of a cobb douglas production function is inappropriate as a description of the production process of the financial firm estimates of the output elasticity may be biased the sensitivity of the estimates of this elasticity to the choice of functional form can also be examined through the use of a generalized functional form methodology third no general consensus has been reached regarding the appropriate definition of bank output thus a diversity of measures of bank output have been employed in previous estimates of economies of scale in banking the sensitivity of the estimated output elasticity of cost to the selection of several alternative measures of output is examined through the use of the generalized functional form methodology finally the b c estimates of the cost function for commercial banks can be used

long run estimates of technological change and scale economies in a dynamic framework australian permanent building societies 1974 1990 abstract this paper formulates and estimates a dynamic model to investigate the characteristics of the cost function of australian permanent building societies while the results suggest that the societies adjust costs quickly to long run levels the modelling of cost dynamics is shown to have a significant influence on estimates of scale economies and on the identification of the timing of shifts in the cost frontier and changes in the growth of total factor productivity

financial firm production of monetary services a generalized symmetric baroett variable profit function approach an alternative monetary production model of financial firms is employed to investigate supply side monetary aggregation financial firms are conceived to produce monetary services as outputs through financial intermediation a new method for testing the existence of consistent monetary output aggregates in financial firms production technology is developed in terms of a multiproduct firm s variable profit function and the method does not require homotheticity of the aggregator function we use a generalized symmetric barnett flexible functional form that specification satisfies global curvature conditions and retains its flexibility under the null hypothesis of weak separability neither of those properties is possessed by other flexible functional forms

does competition for capital discipline governments decentralization globalization and public policy competition among countries or regions within them to attract mobile capital is often thought to discipline their governments motivating them to invest more in infrastructure reduce waste and corruption and spend less on non productive public goods the result should be convergence on business friendly policies we argue that this requires an assumption units start out very similar that is often unrealistic if units are heterogeneous in natural resources geographical location inherited human capital or infrastructure capital mobility often weakens discipline on the poorlyendowed units this may help explain disappointing results of liberalizing capital flows within russia and sub saharan africa jel f36 h73 h87

can megamergers improve bank efficiency abstract this paper uses a fitted multiproduct translog cost function to simulate mergers between pairs of us commercial banks with assets exceeding 1 billion and studies the predicted impact of such mergers on total costs thick frontier analysis reveals that variations in x efficiency dominate scale product mix and branching efficiencies ex ante financial data imply that costs could potentially be reduced in nearly half of the possible mergers except those between banks each larger than 10 billion most cost efficient mergers are across state lines apparently a result of variations in product mix

an empirical investigation of changes in scale economies for the commercial banking firm 1979 1986 the period of the 1980s represents a particularly turbulent time for the banking industry a number of technological and regulatory changes have occurred including the elimination of regulation q which had limited the explicit interest payments that banks could pay on some types of deposits it would be expected that these changes would affect the structure of costs for banks the behavior of the cost function is studied over the 1979 1986 time period and in contrast to previous studies using earlier data increasing economies of scale are found in the later years for banks in both unit and branch banking states these results indicate that there may be increased cost pressure for smaller banks to become larger either through mergers and acquisitions or through internal growth this may lead to further consolidation pressures within the industry and reductions in the overall number of banking firms copyright 1991 by ohio state university press

the comparative efficiency performance of small and large us commercial banks in the pre and post deregulation eras the purposes of this paper are twofold first to employ a flexible non parametric approach to contrast the productive efficiency of a sample of small and large banks in order to examine the relationship between size and productive performance in the banking industry second to investigate whether the relative efficiency performance of small and large banks has changed following the changes in the banking environment in the 1980s and to contrast the rate of technological change achieved by these two groups of banks over this time period the findings based on group specific frontiers suggest that in the pre deregulation environment small banks were more efficient than the large banks while in the deregulated environment small and large banks were equally efficient moreover the dispersion in the efficiency measures of the small banks is found to have increased substantially while that of the large banks changed little over the sample period

an empirical analysis of scale and scope economies and technical change in an irish multiproduct banking firm abstract in contrast to most empirical investigations of the efficiency of multiproduct financial institutions which either estimate scale and scope economies with a given state of technology or only analyse technical change in the presence of overall scale economies this study estimates overall scale economies product specific scale economies and scope economies in the presence of both neutral and non neutral technical change also in contrast to most other empirical studies in this area standard errors are computed for all relevant statistics the findings indicate diseconomies of scope overall diseconomies of scale product specific economies are decreasing for investments and increasing for loans in addition to substantial neutral technical change biased technical change is labour and capital saving and deposits using in character

efficiency and risk in taiwan banking sbm super dea estimation in this study we adopt the two data envelopment analysis dea methods including banker charnes cooper bcc and slacks based measure sbm super efficiency to investigate whether a bank s technical efficiency index s results incorporating account risk and not incorporating account risk differ significantly the information is obtained from 43 taiwanese banks for the period 1998 to 2002 we also employ the nonradial and slacks based malmquist total factor productivity tfp index to measure the impact of productivity change on the panel data our empirical results from the dea approach are summarized as follows 1 loan quality factors have an impact on a bank s efficiency in general the bank with a higher degree of problem loans drops down its efficiency by incorporating account risk however the bank with a lower degree of problem loans increases its efficiency by incorporating account risk 2 super efficiency provides a good framework for ranking efficient units 3 based on the nonradial an

big bank mergers in europe an analysis of the cost implications this paper examines the cost implications from hypothetical cross border bank mergers in the eu in light of recent claims that substantial cost savings could be expected as the result of the eu s single market programme for financial services in fact our results suggest only limited opportunities for costs saving from big bank mergers and indicate that such mergers are more likely to result in an increase in total costs while there is a large variation in the simulated cost outcomes the greatest opportunities for cost savings would appear to be generated by mergers between german and italian banks in contrast mergers between french and german banks appear likely to result in substantial cost increases although the overall findings suggest limited benefits from cross border mergers between large banks this may be a reflection of the methodology merger simulations are carried out hypothetically ignoring any prior information about the pairings we assume no premiums or merger costs and no further synergies resulting from such things as branch closures or a restructuring of the product mix these assumptions may cause us to understate the potential reduction in total costs resulting from large bank mergers and therefore our estimates provide the most pessimistic of total cost reduction outcomes in conclusion the substantial variation of cost outcomes generated suggests that large banks seeking economies through cross border mergers should select potential partners with great care

the dominance of inefficiencies over scale and product mix economies in banking abstract this study measures and analyzes inefficiencies for all u s banks in 1984 inefficiencies are measured relative to a thick frontier cost function and are found to dominate measured scale and product mix economies most inefficiencies are operational in nature involving the overuse of physical inputs rather than financial involving overpayment of interest also technical inefficiencies proportionate overuse of all inputs dominate allocative inefficiencies improper mix of inputs these results suggest that competitive pressures in banking from deregulation will be focused primarily on banks that do not control costs rather than on those of a particular size or product mix

exporting financial institutions management via foreign direct investment mergers and acquisitions we test the relevance of the new trade theory and the traditional theory of comparative advantage for explaining the geographic patterns of international m as of financial institutions between 1985 and 2000 the data provide statistically significant support for both theories we also find evidence that the u s has idiosyncratic comparative advantages at both exporting and importing financial institutions management

scale and scope economies in the multi product banking firm abstract the multi product nature of the banking firm is examined utilizing the translog cost function this analysis indicates that contrary to conventional wisdom natural monopoly scale economies and product specific decreasing costs are not robust characterizations of the banking industry there is however evidence that the cost function is characterized by economies of scope the implications of these results are discussed and extensions of this approach suggested

economies of scale in building societies this paper presents new measurements of economies of scale in the building society industry by estimating a translog total cost function jointly with the derived input cost share equations it differs from previous building society studies by defining total cost to include the interest cost of borrowed funds as well as the operating costs of employing labour and capital services in addition to the usual elasticity three further scale economy measures are developed and estimated input specific economies of scale augmented economies of scale and augmented input specific economies of scale

scale economies and cost complementarities in commercial banks on and off balance sheet activities abstract bank off balance sheet obs activities have grown dramatically and have become significantly important especially at large banks we investigate whether failure to incorporate obs products may lead to a misspecification problem models that exclude deposits from the output specification suggest economies of scale which vanish when deposits are included we find that inclusion of obs products has little effect on the scale economies measures with only a few exceptions the results provide no evidence of cost complementarities in joint production the tremendous growth of bank obs activities in the 1980s may be explained by the very small approximately zero pecuniary cost of these activities

scale economies in banking a restructuring and reassessment the issue of scale economies in banking has a rich history most earlier studies report modest operating cost scale economies for small institutions those with less than about 50 million of deposits in 1968 dollars but are unclear where these economies might end if at all unfortunately these studies are limited in four important respects first those that were well specified did not measure the total cost of banking operations but concentrated on estimating scale economies for individual banking functions e g demand deposits separately from commercial loans second an average cost curve that could take a u shape over the full range of banks was not fitted either because larger banks were not included or because of the functional form used cobb douglas consequently the optimum or minimum cost size of a bank or office could not be determined third the variables measuring the costs of branching were misspecified fourth the branch

a note on cost structure and economies of scale in greek banking abstract this note studies the greek banking industry in 1980 1989 in order to estimate a representative cost structure functional form and search for economies of scale the constructed model uses a translogarithmic cost function that includes the size of assets capital labor and technological progress by using this model which has been used by benston et al 1982 hunter and timme 1986 and others we have been able to estimate for the first time an econometric form of the costs in greek banking and we have been able to investigate economies of scale in the greek banking industry although operating cost scale economies do exist total cost scale economies were not present this has been shown through the utilization of a large sample of pooled data of all greek banks for a period of ten years and the use of two other samples of large and small banks moreover by exploiting the properties of the model we shall be able to show whether technological progress has been a factor which lowers bank costs

traditional and nontraditional banking an information theoretic approach abstract this paper uses a multiproduct approach to analyze the costs of a sample of large banks where bank outputs are measured to account for the different types of information produced by banks diseconomies of scope are found between traditional banking activities of originating and monitoring loans and nontraditional activities of loan selling and buying this suggests maintaining fire walls between commercial bank functions and investment bank functions after the glass steagall act is repealed will not sacrifice joint production economies it also suggests that arguments for repeal of the act based on the existence of such economies are ill founded

the multibank holding company effect on cost efficiency in banking abstract this paper tests the hypothesis that differences in the organizational form embodied in independent banks one bank holding companies and multibank holding companies result in differences in operating cost efficiency the transaction and agency cost paradigms for analysis of organizational efficiency provide theoretical motivation for the hypothesis the effects of organizational form on bank operating expenses for individual banks are evaluated on subsamples divided into quartiles based on total revenue results indicate that for banks having revenues in the lowest quartile both one bank and multibank holding company affiliates are cost efficient relative to independent banks multibank holding company affiliates are cost efficient relative to both one bank affiliates and independent banks for banks in the interquartile range no significant differences in cost efficiency are noted banks in the highest revenue quartile relative efficiency at the organizational level is also evaluated results provide evidence of lower operating costs for banking operations of both multibank and one bank holding company organizations relative to independent banks taken as a whole the results imply that holding company affiliation conveys cost advantages to banking units below the 75th revenue percentile

cost structure and technical change in rural banking abstract using the multi product translog cost function this paper examines the cost structure and technical change occurring within the novel ghanaian rural banks the results of the seemingly unrelated error components model indicate substantial unexploited economies of scale in individual products as well as in overall intermediation there is presence of pairwise complementarity between loans and government securities and between deposits and government securities but absence of pairwise complementarity between loans and deposits overall capital using and labour saving technical change has occurred but efficiency loss in deposit mobilization outweighs the efficiency gains in government securities and lending activities operation of agencies reinforces the overall efficiency loss the rural banks must not be hindered from expanding but in any growth strategy deposit mobilization should take a central position and the cost of operating agencies watched closely

globalization and the confidence game abstract we show that governments in developing countries have an incentive to play the confidence game wherein the need to win the confidence of the international capital market can actually prevent a country from following otherwise sensible policies and force it to follow policies that it would normally consider perverse this incentive arises because of a combination of a conformity bias and good news bias in governmental decision making in an open economy which results in inefficient outcomes which increases rather than decreases the threat of devaluation while institutions that encourage greater transparency and the public revelation of information may often mitigate this inefficiency on some occasions increased transparency may even exacerbate the inefficiency

product line deregulation and the cost structure of us savings and loan associations recent legislative actions restrict thrift powers which were broadened by deregulatory actions in the early 1980s using nationwide data for savings and loans s ls evidence is found that these restrictions may rise intermediation costs for s ls by limiting their ability to exploit economies of scope between mortgage related and other outputs in addition economies of scale for a wide size range of s ls are found evidence is also found to suggest that insolvent s ls have higher costs for the same level of outputs than solvent s ls

banks as multioutput oligopolies an empirical evaluation of the retail and corporate banking markets the distinction between retail and corporate banking markets is of much importance in real life banking organizations the two markets differ with respect to concentration the importance of informational asymmetries and the extent of customer mobility within a standard conjectural variation model estimated on cost efficient banks as well as on the full sample of banks the authors empirically characterize the strategic behavior in each of these markets and also focus on cross market interactions to see whether initial moves in one market affect the equilibrium in the other market they compare their findings to the predictions that would follow from merely considering concentration ratios such as the herfindahl index

economies of superscale in commercial banking most previous studies of scale economies in banking have excluded banks larger than 1 billion in assets thus study by contrast estimates cost functions for the 100 largest us commercial banks hedonic terms are incorporated to correct for the aggregated nature of the call report data available for these banks in addition we attempt to quantify the cost benefit of diversification in the model we estimate efficient bank scale to range from 15 billion to 37 billion in total assets a thousandfold increase over some previous findings these results are supported by comparison of actual average costs as well as by casual historical observation and the level of widespread concern over interstate banking our findings suggest some cost incentive or benefit to expansion or consolidation among large regional banks including interstate expansion or consolidation

the dynamics of technological change in uk retail banking services an evolutionary perspective abstract the purpose of this paper is to elaborate an evolutionary perspective on the process of structural change that has characterized the banking industry in the united kingdom uk for this purpose the evolution of retail financial services is contrasted against the backdrop of the implementation and development of information and communication technologies icts the paper delves into the sources and the effects of technological change in banking over a long term perspective 1840s 1990s to point out the significance of the opportunities and the constraints that have shaped the growth and development of this industry this is interpreted as a three stage evolutionary process driven by intertemporal coordination across several complementary domains including activities of production business organization consumption and the underlying regulatory setting it is concluded that the evolution of uk retail banking displays the characteristics of a distributed process of innovation in which developers of technologies service suppliers and customers contribute to the process of structural change of the industry

an examination of cost structure and production performance of commercial banks in singapore abstract this paper uses a parametric approach in the framework of a translog cost function and a non parametric approach in the framework of linear programming to examine production performance and cost structure of a sample of singaporean commercial banks the results of the parametric methodology suggest that the average cost curve of these banks is u shaped and there are economies of scale for small and medium size banks further analysis provides evidence of economies of scope for all banks regardless of their size the non parametric results indicate that the singaporean banks could have reduced cost by 43 had they all been overall efficient the sources of this cost inefficiency seem to be caused equally by allocative and technical inefficiencies

branching scale economies and banking costs abstract in this paper we develop and estimate a model of bank costs based on a theory of the branch cost function first we show that convenient branch location is important to banking customers and implies that banks do not necessarily operate branches at minimum average cost this theoretical result provides a rationale for including branch variables in the bank cost function second we estimate a statistical cost equation derived explicitly from assumptions about the branch cost function and including branch output variables our empirical results suggest substantial economies of scale at the branch level but no economies from expansion by branching finally we show that the resulting cost structure of the banking industry does not imply that a highly concentrated banking structure is necessary for efficiency thus economies of scale would not be expected to force small banks out of the market even if current restrictions on interstate banking are liberalized

technical change organizational form and the structure of bank production of those technological characteristics related to the nature of competition among firms in an industry or market scale economies and technical change are especially important economies of scale are said to exist when an equiproportional increase in all inputs results in a greater than proportional increase in output or equivalently when an increase in output at constant input prices leads to a less than proportional increase in total costs thus average costs decline as output expands depending upon the extent to which costs decline as output increases regulation of the firms in the industry may be necessary l the literature analyzing scale economies in commercial banking is voluminous the early studies on scale economies in banking include those by benston 1965 1972 greenbaum 1967 murphy 1972 and bell and murphy 1968 more recent studies include those by benston hanweck and humphrey 1982 and clark 1984 2 this literature has established that mild scale economies exist in bank

what can regulators regulate the case of bank entry previous researchers have claimed that the banking acts of 1933 and 1935 reduced the annual rate of entry of new commercial banks by as much as 50 percent between 1936 and 1962 in contrast the authors find that this legislation did not reduce bank entry rates previous studies did not account for legislative changes that reduced restrictions over branch banking and stimulated growth in the number of branches in about half the states during the 1936 62 period after accounting for these changes in branching laws it becomes clear that entry of new banks was depressed by growth in branch banks not by restrictive federal regulations copyright 1992 by ohio state university press

production economies of small depository institutions in the post firrea era evidence from cooperative banks to evaluate the effects of the financial institutions reform recovery and enforcement act firrea of 1989 on the cost behaviour of thrift institutions this study examines the economies of scale and scope of cooperative banks for the years 1992 94 the findings provide evidence of economies of scale and scope over the period under study in addition the results suggest the presence of product specific economies of scale and scope with respect to a few of the products included in the portfolios of the samples some policy implications are drawn based on the findings

state passage of interstate banking legislation an analysis of firm legislative and economic characteristics abstract forty nine states and the district of columbia enacted legislation reducing interstate banking restrictions between july 1982 and april 1993 for these 50 banking bills deregulation increased the average price of bank stocks returns vary cross sectionally by firm characteristics regulatory features and economic conditions returns are positively related to the characteristics of acquisition targets furthermore returns are positively related to legislative features that increase the bargaining power of potential targets and economic conditions that are likely to encourage bank acquisition these findings are consistent with the relaxation of geographic restrictions increasing activity in the corporate control market

short run cost inefficiency of commercial banks a flexible stochastic frontier approach we adopt the intermediation approach and use a flexible stochastic frontier to examine the cost efficiency of united states commercial banks with total assets in excess of million we find an average overall inefficiency of just under 10 percent a level somewhat lower than found in previous work our analysis of intra industry variation concludes that inefficiency generally rises with bank size further banks that have branching networks either domestic or foreign have higher inefficiency on average but at the same time inefficiency falls as the number of offices in the branch network expands state level data on the ease of serviceing the market competition from savings institutions and the financial sophistication of depositors significantly affect bank inefficiency generally with the expected signs finally our findings suggest that regulatory changes that increase capital requirements may lead to increased bank efficiency in the short run copyright 1994 by ohio state university press

a note on efficiency and productivity growth in the korean banking industry 1992 2002 abstract in this paper we present estimates of korean bank inefficiency and productivity change for the period 1992 2002 that are derived from the directional technology distance function our method controls for loan losses that are an undesirable by product arising from the production of loans and allows the aggregation of individual bank inefficiency and productivity growth to the industry level our findings indicate that technical progress during the period was more than enough to offset efficiency declines so that the banking industry experienced productivity growth

changes in the cost of intermediation the case of savings and loans the minimum cost output configuration for a firm may change as the result of a variety of factors including changes in market structure in this paper we test this structural change hypothesis with savings and loan data we find support for the hypothesis that separable constant returns to scale production functions characterize the average savings and loan in our sample in 1983 this is in contrast to the cost complementarities found in 1978 we argue that this result may be the result of regulatory changes that allowed savings and loans to alter their production mix to fully capture the benefits of joint production it seems reasonable to assume that the cost minimizing configuration of a multiproduct firm is potentially subject to nonstationarity during periods of structural change in input and or output markets the late 1970s and early 1980s represent such a period of turbulence for many markets in the financial services industry volatile interest rates combined with technological and regulatory changes may have caused firms in this industry to alter their output mixes in an effort to capture cost complementarities from joint production the purpose of this paper is to test this hypothesis of structural change in the savings and loan industry using both a translog and minflex laurent translog mlt specification of the production function we have chosen to investigate savings and loans s ls during the late 1970s and early 1980s for two reasons first s ls provide an ideal vehicle for testing our hypothesis because they were restricted almost exclusively to mortgages and securities as outputs before the passage of the depository institutions deregulation and monetary control act of 1980 and the garn st germain act of 1982 moreover there were also market changes with respect to both the pricing and mix of inputs i e deposits our second rationale involves the fact that there is a large and growing body of literature in the area of what is now called the

when managers cover their posteriors making the decisions the market wants to see the stock market has opinions as to what choices firms should make we show that concern for current share prices may lead managers to make these choices rather than those suggested by their own superior information even when arbitrarily many privately informed firms have to make a similar decision the market s prejudices may still prevail we compare the distortions that arise from share price maximization with those due to herd behavior among profit maximizing firms and show that the former results in strictly less efficient use of information

returns to scale and input substitution for large u s banks the united states commercial banking industry has experienced significant changes in recent years the recent wave of mergers and the near term prospects of interstate banking suggests that the industry is moving toward much larger average banking organizations rhoades 1985 will a more concentrated banking industry result in lower costs due to scale economies we address this question by examining the cost function for large banks numerous studies of economies of scale in banking exist generally tracing their roots to the classic papers by benston 1965 and bell and murphy 1968 a good review of the most recent studies can be found in clark 1988 the majority of the papers uses samples of smaller banks that is under 1 billion in deposits finding generally that economies of scale are quickly exhausted and that further increases in bank size occur at constant or possibly increasing cost the extrapolation of previous findings for samples of smaller banks to large banks may be problematic especially in the current environment first large banks service a different mix of markets and customers than small banks suggesting that large and small banks probably face different cost structures second the process of deregulation may have rendered the results of prior studies moot since the data pertain to periods before significant deregulation since we

international comparison of bank production characteristics and technological change in this paper we conduct an international comparison of bank production and technological characteristics the comparison is performed using novel evidence on changes in labour demand over the period 1980 89 for banks headquartered in canada france west germany italy japan and the united states the results suggest that there is relatively low substitutability of labour for capital in the production process of these banking organizations significant scale economies were found with regards to the expansion of output and the concomitant increase in labour in addition technological change operated to lower the quantity of inputs needed to produce a given level of outputs and increased the minimum efficient size bank over the sample period many of the production characteristics and technology effects varied significantly across countries these findings imply that intercountry differences in production characteristics and technological change should be explicitly recognized in bank strategic planning

technical progress inefficiency and productivity change in u s banking 1984 1993 studies often find that on average u s commercial banks are quite inefficient and the authors find that banks became more technically inefficient between 1984 and 1993 from a new decomposition of the malmquist productivity index into changes in pure technical and scale efficiency as well as both pure technical changes and changes in scale of technology they find that much of the inefficiency increase can be attributed to the general failure of banks to adopt technological improvements made by a few banks that advanced the efficient frontier small banks experienced especially large decreases in both efficiency and productivity

branching restrictions and banking costs abstract previous research of banking costs has been limited by the choice of the functional form irregularities in the estimated cost functions and a failure to rigorously examine the difference between banks in branching states and banks in unit banking states this paper addresses these shortcomings banks are modelled as three input three output cost minimizing firms a three equation system is estimated using 1985 functional cost analysis data the findings indicate that banks in unit banking states experience diseconomies of scale banks in branching states experience diseconomies of scale at the bank level but economies of scale at the branch level we also find evidence of economies of scope for branch state banks but not for unit state banks

the dynamics of behavior change evidence from energy conservation abstract little is known about the effect of message framing on conservation behavior over time in a randomized controlled trial with residential households we use advanced metering and information technologies to test how different messages about household energy use impact the dynamics of conservation behavior down to the appliance level our results based on 374 million panel observations of kilowatt hour kwh electricity consumption for 118 households over 9 months show that differences in behavioral responses due to message framing become more significant over time we find that a health based frame in which households consider the human health effects of their marginal electricity use induced persistent energy savings behavior of 8 10 over 100 days whereas a more traditional cost savings frame drove sharp attenuation of treatment effects after 2 weeks with no significant savings versus control after 7 weeks we discuss implications for the design of effective information campaigns to engage households in conservation behavior

cost structures in multinational and domestic banking abstract prior research on international banking has proposed many reasons for the multinationalization of u s banks but provided little empirical support for its propositions using a pooled time series data set from 1987 to 1990 this study analyzes the ray and expansion path scale economies and expansion path subadditivity of u s based multinational banks mnbs both at the firm and the plant levels it also measures and analyzes inefficiencies for these banks inefficiencies are measured relative to a thick frontier cost function a similar analysis is conducted for domestic banks dbs for comparison purposes no support is found for the prior belief that similar cost structures exist for mnbs and dbs in general we find that mnbs are able to fully exploit economies of scale and face lesser diseconomies from joint production and lower inefficiencies than dbs

fiscal policies and the choice of exchange rate regime a common argument against either a monetary union or a regime or a fixed exchange rates is that they preclude flexible use of the inflation tax the authors address this point of view by comparing three alternative exchange rate regimes a pure float an ems regime in which the exchange rate is fixed but can be realigned and a monetary union the authors model the three regimes as alternative commitments on future seigniorage policies this approac h suggests that it is not possible to pareto rank the three regimes o n the other hand the authors provide intuitive conditions under which each of the systems is superior to the others copyright 1993 by royal economic society

deregulation technological change and the business lending performance of large and small banks according to deyoung et al journal of financial services research 2004 deregulation and technological change has divided the us banking industryinto two primarysize based groups verylarge banks specializing in the use of hard information to make standardized loans and smaller banks specializing in the use of soft information and relationship development to make non standardized loans we evaluate business lending performance for small and large banks over the 1993 2001 period small business lending bysmall banks is characterized byrelationship development and non standardized loans consistent with deyoung et al s model we find that after controlling for market concentration cost of funds and a variety of other factors that might influence yields smaller banks perform better than larger banks in the small business lending market however larger banks appear to have the advantage in credit card lending a market characterized byimpersonal relationships and standardized loans interestingly we find evidence that larger banks have been making inroads in the market for the smallest business loans a result consistent with the use of credit scoring bylarge banks to make

the relationship between net interest margin and noninterest income using a system estimation approach abstract this paper examines the determinants of bank net interest margin nim and non traditional banking activities nii a system estimation approach is employed to control for the simultaneity between nim and nii for commercial banks in a group of 28 financially liberalized countries during the period between 1997 and 2004 we find a statistically significant negative relationship between nim and nii for the period between 1997 and 2002 a generally positive but statistically insignificant association between nim and nii is found for the subsequent period 2003 2004 banks increasing involvement in non traditional activities is negatively correlated with risk adjusted profitability measures in the former subperiod suggesting no obvious diversification benefits however the share of noninterest income is positively related to the return on assets roa and the return on equity roe for the latter subsample

financial deregulation and total factor productivity change an empirical study of turkish commercial banks abstract in january 1980 a new liberal economic policy was adopted in turkey to promote financial market development and increase the efficiency and productivity of the financial sector by fostering competition among banks as a result of this policy the turkish banking system witnessed a series of legal structural and institutional changes throughout the 1980s to enhance their competitive viability turkish banks responded by streamlining their operations and investing in new technology utilizing a dea type malmquist total factor productivity change index we examine productivity growth efficiency change and technical progress in turkish commercial banks during the deregulation of financial markets in turkey we found that all forms of turkish banks although in different magnitudes have recorded significant productivity gains driven mostly by efficiency increases rather than technical progress efficiency increases however were mostly owing to improved resource management practices rather than improved scales our results also indicate that private banks began to close their performance gap with public banks in the new environment

economies of scale and scope in thrift institutions the case of finnish cooperative and savings banks accounting data on operating costs and outputs for cooperative and savings banks in 1983 and 1984 are used to provide empirical evidence on the cost structure of thrift institutions in finland a modified translog cost model is fitted to the data economies of scale and scope are estimated based on the coefficients of the cost model using advances and bills as outputs the results indicate that cost curves for both cooperative banks and savings banks generally tend to be l shaped at the plant level and u shaped at the firm level scope diseconomies are found in the joint production of advances and bills this evidenceindicates that natural monopoly conditions are not present in the finnish thrift industry