Returns to Scale and Input Substitution for Large U. S. Banks

Noulas, Athanasios G.; Ray, Subhash C.; Miller, Stephen M.

doi:10.2307/1992130

Cited by 184 publications

(84 citation statements)

References 9 publications

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“…Firstly, larger banks may be more concerned about enjoying a 'quiet life' than with increasing financial access (Mitchell & Onvural, 1996). Secondly, bigger banks are not exclusively associated with economies of scale and could also be linked with considerable diseconomies of scale, which engender inefficiencies in terms of poor organisation, coordination and management (Berger et al, 1987;Noulas et al, 1990;Mester, 1992;Clark, 1996;Karray & Chichti, 2013). Finally, big banks could be using information sharing offices to increase their profit margins (Brown & Zehnder, 2010;Boateng et al, 2016).…”

Section: International Monetary Fund (Imf)mentioning

confidence: 99%

Essential Information Sharing Thresholds for Reducing Market Power in Financial Access: A Study of the African Banking Industry

2016

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Section: International Monetary Fund (Imf)mentioning

confidence: 99%

Essential Information Sharing Thresholds for Reducing Market Power in Financial Access: A Study of the African Banking Industry

2016

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“…Moreover, most of the studies on cost scope economies within financial service industries find no substantial evidence of cost scope economies (e.g., Berger et al (1987), Mester (1987Mester ( , 1993, Hunter et al (1990), Berger and Humphrey (1991), Goldberg et al (1991), Pulley and, Noulas et al (1990)). …”

Section: Literature Reviewmentioning

confidence: 99%

The effects of focus versus diversification on bank performance: Evidence from Chinese banks

Berger

Hasan

Zhou

2010

Journal of Banking & Finance

411

199

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This paper investigates the effects of focus versus diversification on bank performance using data on Chinese banks during the 1996-2006 period. We construct a new measure, economies of diversification, and compare the results to those of the more conventional focus index, which is based on the sum of squares of shares in different products or regions. Diversification is captured in four dimensions: loans, deposits, assets, and geography. We find that all four dimensions of diversification are associated with reduced profits and higher costs. These results are robust regardless of alternative measures of diversification and performance. Furthermore, we observe that banks with foreign ownership (both majority and minority ownership) and banks with conglomerate affiliation -are associated with fewer diseconomies of diversification, suggesting that foreign ownership and conglomerate affiliation play an important mitigating role. This analysis may provide important implications for bank managers and regulators in China as well as in other emerging economies.

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“…When large US banks were included in the samples (>$1 billion assets), usually the minimum average cost point was found between $2 billion and $10 billion in assets size, and evidence of scope economies typically was not found [Hunter and Timme (1986); Shaffer and David (1986); Kim (1986); Hunter and Timme and Yang (1990); Noulas, Ray and Miller (1990)]. Hunter and Timme (1986), in particular, examined the nature of technical change in the banking industry and reported that it produced significant cost reductions for large banks.…”

Section: Studies On Bank Costs In the Usmentioning

confidence: 99%

Analysing the determinants of bank efficiency: the case of Italian banks

2004

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This study investigates the main determinants of Italian banks' cost efficiency over the period 1993-1996, by employing a Fourier-flexible stochastic cost frontier in order to measure X-efficiencies and economies of scale. Quality and riskiness of bank outputs are explicitly accounted for in the cost function and their impact on cost efficiency levels is evaluated. The results show that mean X-inefficiencies range between 13 and 15 per cent of total costs and they tend to decrease over time for all bank sizes. Economies of scale appear present and significant, being especially high for popular and credit co-operative banks. Moreover, the inclusion of risk and output quality variables in the cost function seems to reduce the significance of the scale economy estimates. Following Spong et al. (1995) a profitability test is undertaken that allows for the identification of banks that are both cost and profit efficient. The results suggest that the most efficient and profitable institutions are more able to control all aspects of costs, especially labour costs. Finally, the data are pooled to carry out a logistic regression model in order to examine bank- and market-specific factors that influence Italian banks' inefficiency. Confirming Mester (1993, 1996), inefficiencies appear to be inversely correlated with capital strength and positively related to the level of non-performing loans in the balance sheet. The analysis also shows that there is no clear relationship between asset size and bank efficiency. Finally, it is possible to infer that quoted banks seem to be on average more efficient than their non-quoted counterparts.

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Returns to Scale and Input Substitution for Large U. S. Banks

Cited by 184 publications

References 9 publications

Essential Information Sharing Thresholds for Reducing Market Power in Financial Access: A Study of the African Banking Industry

Essential Information Sharing Thresholds for Reducing Market Power in Financial Access: A Study of the African Banking Industry

The effects of focus versus diversification on bank performance: Evidence from Chinese banks

Analysing the determinants of bank efficiency: the case of Italian banks

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