Technical Progress, Inefficiency and Productivity Change in U.S. Banking, 1984-1993

Abstract

Numerous studies have found that US commercial banks are quite inefficient, and we find that, on average, banks became more technically inefficient between 1984 and 1993. Our analysis of productivity change, however, shows that technological improvements adopted by a few banks pushed out the efficient frontier, and that, on average, commercial banks experienced productivity gains. For banks with assets less than $300 million, however, technological improvement was insufficient to offset increased inefficiency, and thus productivity declined over the period. Our findings suggest that increasing inefficiency is reflective of an industry undergoing rapid technical change and adjustment of average firm size, but not necessarily a long-term decline.

The effects of geographic expansion on the productivity of Spanish savings banks

“…Major applications in banking include Grifell-Tatjé and Lovell (1996), Wheelock and Wilson (1999) or Mukherjee et al (2001). We also consider nonparametric techniques in the second-stage estimation, where we attempt to assess the impact of geographic expansion on the productivity of savings banks.…”

Are Differences in Acquiring Bank Profit Efficiency Priced in Financial Markets?

“…8 For a given bank, it is measured as a percentage of the PROFEFF of the 6 It is important to use as wide a base as possible for estimating the efficient frontier as it should have the very best banks in terms of profit efficiency. Fortunately, such a frontier is likely to represent banks in a wide range of sizes as Wheelock and Wilson (1999) document that some banks in each size group are among the most efficient. 7 This section is based in part on Akhigbe and McNulty (2003).…”

“…2 Mergers and acquisitions are used interchangeably in this paper even though some acquisitions are not mergers. 3 Wheelock and Wilson (1999) document that in the 1990s smaller banks had a particularly difficult time adopting productivity enhancing technical changes. Similiarly, Stiroh (2000) finds that the optimal bank size seems to have increased in the 1990s era of deregulation, technological change, and financial innovation.…”

“…As noted inBerger et al (1995) and inWheelock and Wilson (1999), the period of this study included significant technological and regulatory changes for US banks and so it is important to estimate the efficient frontier every year. 14 Inefficiencies are assumed to follow an asymmetric, half normal distribution, and the random errors follow a symmetric normal distribution.…”

Estimating global frontier shifts and global Malmquist indices

“…definition which is also called the adjacent Malmquist index (Althin 2001), has received considerable attention in the literature (see e.g. Fä re et al 1994bFä re et al , 1994cFä re et al , 1997Wheelock and Wilson 1999;Ray and Desli 1997;Ray 2001;Lovell 2001;Balk 2001). Here, however, we look at a different aspect of the Malmquist indices-aggregation rather than disaggregation.…”