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The Effect Of The 2008 Global Financial Crisis On The Efficiency Of Large U.S. Commercial Banks

Author

Listed:
  • SEYED MEHDIAN

    (School of Management, The University of Michigan-Flint, Flint , MI 48502, USA)

  • RASOUL REZVANIAN

    (School of Business, Ithaca College, Ithaca, NY 14850, USA)

  • OVIDIU STOICA

    (Department of Finance, Money and Public Administration, Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iasi, Iasi, 700506, Romania)

Abstract

The 2008 financial crisis, originated by securitization of sub-prime mortgage loans, had a huge impact on U.S. financial institutions and markets. We hypothesize that due to this crisis, the commercial banking industry has changed their portfolio structures and risk-taking behavior. To shed light on the response of U.S. banks to the 2008 financial crisis, we use the non-parametric approach to measure and compare the overall efficiency of large U.S. banks pre- and post-2008 financial crisis. We then decompose the overall measure of efficiency into allocative, overall technical, pure technical, and scale efficiency measures to better understand the sources of banking inefficiencies. The results indicate that large U.S. banks indeed changed their portfolios structure, and the efficiency of large commercial banks in the United States declined substantially during the financial crisis. Although it has been recovering since then, it still has not reached to the pre-crisis efficiency level.

Suggested Citation

  • Seyed Mehdian & Rasoul Rezvanian & Ovidiu Stoica, 2019. "The Effect Of The 2008 Global Financial Crisis On The Efficiency Of Large U.S. Commercial Banks," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 24, pages 11-27, December.
    • Handle: RePEc:aic:revebs:y:2019:j:24:mehdians
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    References listed on IDEAS

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    Cited by:

    1. Rezvanian, Rasoul & Mehdian, Seyed, 2024. "The impact of the 2008 Global Financial Crisis on the efficiency and profitability of the U.S. small banks," Finance Research Letters, Elsevier, vol. 67(PB).

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    More about this item

    Keywords

    banks; financial crisis; efficiency; productivity; U.S.A.;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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