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Technical inefficiency and output scale in banking and industry

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  • Gerasimos T. Soldatos

Abstract

According to this paper, technical inefficiency unrelated to problem loans on the part of banks, would result in loan expansion, inducing, in turn, firms that rely heavily on bank borrowing, to expand their production accordingly as they can benefit from higher lending. Increased scale of production fosters economies of scale, which can compensate for the adverse effects of technical inefficiency on cost, reinforcing at the same time sales. Production can expand even further if firms maximize their profit by acknowledging their own technical inefficiency in the form of scale inefficiency.

Suggested Citation

  • Gerasimos T. Soldatos, 2020. "Technical inefficiency and output scale in banking and industry," Economics and Business Letters, Oviedo University Press, vol. 9(3), pages 270-278.
    • Handle: RePEc:ove:journl:aid:14513
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/14513
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    References listed on IDEAS

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