Financial deregulation and economies of scale and scope: Evidence from the major Australian banks

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    Abstract

    In this study a parametric approach employing a flexible translog functional model is used to estimate economies of scale and scope in the four major Australian banks (ANZ, NAB, CBA and WESTPAC). Two hypotheses are tested to determine whether bank economies of scale have changed and also whether economies of scope were exhausted following financial deregulation. The analysis reveals that there is evidence for a continuing difference in banks' economies of scale as a result of deregulation. The empirical evidence also suggests that economies of scope were not exhausted by financial deregulation. In addition, there is continuing evidence of considerable economies of scope in the four major banks. In other words, Australian banks have not fully embraced deregulation and adjusted their joint production in a cost efficient manner. Findings in this study indicate that further deregulation would create a more competitive and efficient banking environment in Australia.

    Original languageEnglish
    Pages (from-to)197-214
    Number of pages18
    JournalAsia-Pacific Financial Markets
    Volume8
    Issue number3
    DOIs
    Publication statusPublished - 1 Jan 2001

    Keywords

    • Economies of scale and scope
    • Efficiency
    • Financial deregulation

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