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Journal of Productivity Analysis

, Volume 52, Issue 1–3, pp 69–84 | Cite as

A dynamic stochastic frontier model with threshold effects: U.S. bank size and efficiency

  • Pavlos Almanidis
  • Mustafa U. Karakaplan
  • Levent KutluEmail author
Article
  • 74 Downloads

Abstract

Common/Single frontier methodologies that are used to analyze bank efficiency and performance can be misleading because of the homogeneous technology assumption. Using the U.S. banking data over 1984-2010, our dynamic methodology identifies a few data-driven thresholds and distinct size groups. Under common frontier assumption, the largest banks appear to be 22% less efficient on average than how they are in our model. Also, in the common frontier model, smaller banks seem to be relatively more efficient compared to their larger counterparts. Hence, common policies or regulations may not be well-balanced about controlling the banks of different sizes on the spectrum.

Keywords

Dynamic Stochastic Frontier Bank Efficiency Bank Heterogeneity 

JEL classification

C13 C23 D24 G21 G28 

Notes

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

Supplementary material

11123_2019_565_MOESM1_ESM.rtf (1.8 mb)
Supplementary Information

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.International Tax Services, Transfer Pricing, Ernst & Young LLPTorontoCanada
  2. 2.College of BusinessGovernors State UniversityUniversity ParkUSA
  3. 3.Department of Economics and FinanceUniversity of Texas Rio Grande ValleyEdinburgUSA

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