Productive efficiency in commercial banks
Abstract
Commercial banks are of many different sizes, are subject to a myriad of regulatory guidelines, and have experienced both hardship and (financial) health over the past two decades. This work examines the productive efficiency of commercial banks. Efficiency measures are examined under different bank delineations--small, large, agricultural, nonagricultural, single-office, and multi-office. Productive efficiency is also analyzed with bank loan diversity, market share, market concentration, and profitability. The results are quite like others in that input-output specification, or the decision as to what banks truly produce, and what resources are utilized, markedly influence the findings. Generally, very small banks are not as efficient as large(r) banks. Single-office and multi-office banks perform with similar efficiency, as do agricultural and nonagricultural banks. Surprisingly, bank efficiency is not related to bank profitability, but is higher among banks with less diversified loan portfolios. Well diversified lenders, though, generate higher profits than do the more efficient, less-diversified lenders. Bank market share and banking market's concentration are positively related to efficiency, but there is no significant relationship between the profitability of banks and the concentration of the banking market in which the banks operate.
Degree
Ph.D.
Advisors
Baker, Purdue University.
Subject Area
Agricultural economics|Banking|Business costs
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