Regulation, deregulation and managerial behaviour: new evidence on expense preference in banking

Do Rooms Managers Exhibit Expense Preference Behavior in Nevada Casinos?

“…The only variable that supports the proposed hypothesis in all models is occupied rooms, which is used as an indication of firm size. These results support most previous findings that as firm size increases, so do all payroll related expenses analyzed (Gropper & Oswald, 1996;Mixon & Upadhyaya, 1996;Smirlock & Marshall, 1983). These finding also support Fields (1998) and Repetti (2011) who evaluate output instead of total assets and find that an increase in output significantly increases payroll related expenses.…”

“…More recent research by Gropper and Oswald (1996) also use total assets as a proxy for size and finds a positive and significant relationship between size and a number of different cost indicators such as personnel costs and number of employees. While the authors do not believe their findings indicate the presence of expense preference behavior, they believe it is an important factor to consider.…”

Organizational Form and Expense Preference: Spanish Experience

“…The 1992 inefficiency scores reveal a slightly higher inefficiency for both groups of institutions immediately after the deregulatory years with evidence of a slight decline of scores in the increasingly competitive post-deregulatory years as evidenced by the 1995 scores. These results are consistent with Gropper and Oswald (1996) who reported a decrease in expense-preference behaviour of US banks during the post-deregulatory period.…”

Insolvency, moral hazard and expense preference behavior: Evidence from US savings and loan associations

“…Edwards (19771, in a path-breaking study of the banking industry, found strong evidence for the expense preference theory of managerial behavior, and related his results to a pervasive regulatory environment. Later studies by Hannan (1979), Hannan andMavinga (19801, Arnould (1989, andGropper andOswald (1995) found evidence of expense preference behavior among commercial banks, while Akella and Greenbaum (1988) and Verbrugge and Jahera (1981) found evidence to support similar conditions for savings and loan associations. In contrast to these findings, studies by Blair and Placone (1988) and Mester (1989) found, at best, very weak support for expense preference, and little evidence of significant differences in expense preference activities between stock and mutual ownership forms.…”