Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 1883 - 1895 |
| Number of pages | 13 |
| Journal | Journal of Banking and Finance |
| Volume | 36 |
| Issue number | 7 |
| DOIs | |
| Publication status | Published - 2012 |
Cite this
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Productivity and efficiency at large and community banks in the US: A Bayesian true random effects stochastic distance frontier analysis. / Feng, Guohua; Zhang, Xiaohui.
In: Journal of Banking and Finance, Vol. 36, No. 7, 2012, p. 1883 - 1895.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - Productivity and efficiency at large and community banks in the US: A Bayesian true random effects stochastic distance frontier analysis
AU - Feng, Guohua
AU - Zhang, Xiaohui
PY - 2012
Y1 - 2012
N2 - This paper compares the productivity and efficiency of large banks and community banks in the United States over the period 1997-2006. This comparison is performed by estimating a true random effects stochastic distance frontier model - a model that is capable of disentangling unobserved heterogeneity from inefficiency - within a Bayesian framework. We find that failure to consider unobserved heterogeneity results in a misleading ranking of banks and mismeasured technical efficiency, productivity growth, and returns to scale. Our results show that, compared with community banks, large banks have experienced much higher productivity growth and higher levels of returns to scale. Our estimates of total factor productivity growth show a clear downward trend for both large and community banks, and our decomposition of the output-distance-function-based Divisia productivity index indicates that technical change is the driving force behind this trend.
AB - This paper compares the productivity and efficiency of large banks and community banks in the United States over the period 1997-2006. This comparison is performed by estimating a true random effects stochastic distance frontier model - a model that is capable of disentangling unobserved heterogeneity from inefficiency - within a Bayesian framework. We find that failure to consider unobserved heterogeneity results in a misleading ranking of banks and mismeasured technical efficiency, productivity growth, and returns to scale. Our results show that, compared with community banks, large banks have experienced much higher productivity growth and higher levels of returns to scale. Our estimates of total factor productivity growth show a clear downward trend for both large and community banks, and our decomposition of the output-distance-function-based Divisia productivity index indicates that technical change is the driving force behind this trend.
U2 - 10.1016/j.jbankfin.2012.02.008
DO - 10.1016/j.jbankfin.2012.02.008
M3 - Article
VL - 36
SP - 1883
EP - 1895
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 7
ER -