A New Method to Decompose Profit Efficiency: an Application to US Commercial Banks

Publicado en

  • Journal of Productivity Analysis

Resumen

  • We propose a new method to estimate profit efficiency which makes explicit how revenue and cost efficiencies contribute to overall profit efficiency. Using data from US commercial banks from 2001 to 2010, we find that losses due to profit inefficiency represent about 3.5% of banks’ equity of which 1% is due to revenue inefficiency and 2.4% to cost inefficiency. Revenue efficiency changes affect more overall profit efficiency than equivalent cost efficiency changes. In contrast to previous studies, but in line with economic intuition, we find that while revenue and cost efficiencies tend to be negatively correlated, both correlate positively with profit efficiency.

fecha de publicación

  • 2017

Líneas de investigación

  • Banking
  • Cost Efficiency
  • Nonstandard Profit Function
  • Profit Efficiency
  • Revenue Efficiency
  • Stochastic Frontier

Identificador de objeto digital (DOI)

  • https://doi.org/10.1007/s11123-017-0511-9

Página inicial

  • 117

Última página

  • 132

Volumen

  • 48

Issue

  • 2