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Efficiency and productivity change in the U.S. commercial banking industry: a comparison of the 1980s and 1990s

Author

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  • Allen N. Berger
  • Loretta J. Mester

Abstract

The authors investigate efficiency and productivity growth of the U.S. banking industry over the latter part of the 1980s and first part of the 1990s using comprehensive data on U.S. commercial banks. Cost efficiency decreased slightly between the 1980s and 1990s, and large banks showed a sizable decline in profit efficiency. Total predicted production costs increased over both the 1980s and 1990s, reflecting cost productivity declines. Changes in business conditions led to cost declines over both periods. Total predicted profits increased in the 1980s and 1990s, with the entire change reflecting increased profit productivity. Changing business conditions led to small declines in profits.

Suggested Citation

  • Allen N. Berger & Loretta J. Mester, 1997. "Efficiency and productivity change in the U.S. commercial banking industry: a comparison of the 1980s and 1990s," Working Papers 97-5, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:97-5
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/1997/wp97-5.pdf
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    Cited by:

    1. Khanh Ngoc Nguyen, 2019. "Revenue Diversification, Risk and Bank Performance of Vietnamese Commercial Banks," JRFM, MDPI, vol. 12(3), pages 1-21, August.
    2. Bijoy Rakshit, 2021. "Evaluating Profitability and Marketability Efficiency: A Case of Indian Commercial Banks," Global Business Review, International Management Institute, vol. 22(4), pages 977-995, August.
    3. Elena Beccalli & Barbara Casu & Claudia Girardone, 2006. "Efficiency and Stock Performance in European Banking," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(1‐2), pages 245-262, January.
    4. Barbara Casu & Claudia Girardone, 2004. "Large banks' efficiency in the single European market," The Service Industries Journal, Taylor & Francis Journals, vol. 24(6), pages 129-142, November.
    5. Barbara Casu & Claudia Girardone, 2006. "Bank Competition, Concentration And Efficiency In The Single European Market," Manchester School, University of Manchester, vol. 74(4), pages 441-468, July.
    6. Nicolas Véron & Morris Goldstein, 2011. "Too big to fail- the transatlantic debate," Working Papers 495, Bruegel.
    7. Bok Baik & Joon Chae & Sunhwa Choi & David B. Farber, 2013. "Changes in Operational Efficiency and Firm Performance: A Frontier Analysis Approach," Contemporary Accounting Research, John Wiley & Sons, vol. 30(3), pages 996-1026, September.
    8. Katerina Voycheska, 2011. "Empirical Research on the Banking Efficiency in R. Macedonia," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 73-93.

    More about this item

    Keywords

    Banks and banking; Productivity;

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