IDEAS home Printed from
   My bibliography  Save this article

Short-Run Cost Inefficiency of Commercial Banks: A Flexible Stochastic Frontier Approach


  • Kaparakis, Emmanuel I
  • Miller, Stephen M
  • Noulas, Athanasios G


We adopt the intermediation approach, and use a flexible stochastic frontier to examine the cost efficiency of United States commercial banks with total assets in excess of & Million. We find an average overall inefficiency of just under 10 percent, a level somewhat lower than found in previous work. Our analysis of intra-industry variation concludes that inefficiency generally rises with bank size. Further, banks that have branching networks, either domestic or foreign, have higher inefficiency, on average; but, at the same time, inefficiency falls as the number of offices in the branch network expands. State level data on the ease of serviceing the market, competition from savings institutions, and the financial sophistication of depositors significantly affect bank inefficiency, generally with the expected signs. Finally, our findings suggest that regulatory changes that increase capital requirements may lead to increased bank efficiency in the short run. Copyright 1994 by Ohio State University Press.

Suggested Citation

  • Kaparakis, Emmanuel I & Miller, Stephen M & Noulas, Athanasios G, 1994. "Short-Run Cost Inefficiency of Commercial Banks: A Flexible Stochastic Frontier Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(4), pages 875-893, November.
  • Handle: RePEc:mcb:jmoncb:v:26:y:1994:i:4:p:875-93

    Download full text from publisher

    File URL:
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:26:y:1994:i:4:p:875-93. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.