Profit Efficiency of U.S. Commercial Banks: A Decomposition

Serie

• Documentos de Trabajo CIEF

Resumen

• This paper presents new evidence regarding the relation between profit, revenue, and cost efficiencies of U.S. commercial banks. Building on the widely used nonstandard profit function (NSPF) approach, we show (i) why estimation of NSPF would be wrong and (ii) how revenue and cost efficiencies contribute to profit efficiency. Using data from U.S. commercial banks from 2001 to 2010, we find that losses due to profit inefficiency represents about 8.2% of banks’ equity of which 3.5% is due to revenue inefficiency and 4.7% to cost inefficiency. Cost efficiency weighs more than revenue efficiency in estimated profit efficiency. However, compared with cost inefficiency, revenue inefficiency affects more overall profitability.

autores

• Kumbhakar, Subal C.
• Restrepo-Tobón, Diego

fecha de publicación

• 2013-08

Área temática

• D24 - Producción; Coste; Productividad del capital; Productividad total de los factores; (PTF) Productividad factorial; Capacidad
• G21 - Bancos; Instituciones de depósito; Instituciones Microfinancieras; Hipotecas
• L13 - Oligopolio y otros mercados imperfectos

Enfoque geográfico

• North America  Continent
• United States of America  Country

Líneas de investigación

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

Issue

• 10939