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Efficiency in Australian building societies: an econometric cost function approach

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  • Andrew Worthington

Abstract

Maximum-likelihood estimates of a stochastic cost frontier function incorporating efficiency effects are obtained for 22 Australian building societies in the period 1992-1995. Cost inefficiency scores indicate that building societies' costs were 20% above what could be considered necessary. The results also indicate that capital adequacy restrictions are not a significant influence on the level of inefficiency, though branch and agency networks, asset size, and non-core commercial activities are. At the industry level that there has been an improvement in the level of cost efficiency of Australian building societies during the period in question.

Suggested Citation

  • Andrew Worthington, 1998. "Efficiency in Australian building societies: an econometric cost function approach," Applied Financial Economics, Taylor & Francis Journals, vol. 8(5), pages 459-467.
  • Handle: RePEc:taf:apfiec:v:8:y:1998:i:5:p:459-467
    DOI: 10.1080/096031098332754
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    References listed on IDEAS

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    1. Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 1993. "The Measurement of Productive Efficiency: Techniques and Applications," OUP Catalogue, Oxford University Press, number 9780195072181.
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    Cited by:

    1. Charles C. Okeahalam, 2008. "Internationalisation and firm performance: Evidence from estimates of efficiency in banking in Namibia and Tanzania," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(7), pages 942-964.
    2. Clements Adeyinka Akinsoyinu, 2015. "Efficiency Evaluation of European Financial Cooperative Sector. A Data Envelopment Analysis Approach," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 5(4), pages 11-21, October.
    3. Andrew C. Worthington, 2010. "Frontier Efficiency Measurement In Deposit-Taking Financial Mutuals: A Review Of Techniques, Applications, And Future Research Directions," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 81(1), pages 39-75, March.

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