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The Relative Cost Efficiency of Stock versus Mutual Thrifts: A Bayesian Approach

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  • James M. Sfiridis
  • Kenneth N. Daniels

Abstract

The relative cost efficiency of the mutual versus stock forms of ownership for thrifts has been a relevant issue in an era of deregulation and competition in the financial services industry. In this study, Bayesian‐based Markov chain Monte Carlo (MCMC) resampling methods are used to solve a stochastic cost frontier model and effectively determine cost efficiencies for the stock and mutual thrift groups. We find a statistically significant difference between both the cost frontiers and the cost efficiencies of the two groups, with the stock group operating at the lower‐cost point. Agency problems explain a significant portion of the cost efficiency difference. Capital structure differences, though not helping to explain differences in cost efficiency, do help to explain differences in cost structure and managerial attitudes toward risk.

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  • James M. Sfiridis & Kenneth N. Daniels, 2004. "The Relative Cost Efficiency of Stock versus Mutual Thrifts: A Bayesian Approach," The Financial Review, Eastern Finance Association, vol. 39(1), pages 153-179, February.
    • Handle: RePEc:bla:finrev:v:39:y:2004:i:1:p:153-179
    DOI: 10.1111/j.0732-8516.2004.00071.x
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    2. Nobuyoshi Yamori & Kozo Harimaya & Kei Tomimura, 2017. "Corporate governance structure and efficiencies of cooperative banks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 22(4), pages 368-378, October.
    3. George J. Benston, 2004. "What's Special About Banks?," The Financial Review, Eastern Finance Association, vol. 39(1), pages 13-33, February.
    4. Yoshikatsu Shinozawa, 2007. "The Effect of Organisational Form on Investment Products: an empirical analysis of the UK unit trust industry," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1244-1259, November.
    5. Larry D. Wall, 2004. "Symposium on Financial Institutions," The Financial Review, Eastern Finance Association, vol. 39(1), pages 1-11, February.
    6. Yoshikatsu Shinozawa, 2010. "Mutual Versus Proprietary Ownership: An Empirical Study From The Uk Unit Trust Industry With A Company‐Product Measure," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 81(2), pages 247-280, June.

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