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Economies of scale and organization efficiency in banking
Author(s) -
Todhanakasem Warapatr,
Lynge Morgan J.,
Primeaux Walter J.,
Newbold Paul
Publication year - 1986
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090070407
Subject(s) - economies of scale , profit (economics) , unit (ring theory) , economics , scale (ratio) , function (biology) , business , unit cost , monetary economics , banking industry , returns to scale , finance , economy , industrial organization , microeconomics , production (economics) , biology , physics , mathematics education , mathematics , quantum mechanics , evolutionary biology
Previous studies attempting to assess economies of scale in banking firms have largely relied upon cost functions. The profit‐function approach enjoys several important advantages over the cost‐function method, consequently that is the approach used in this study. A risk‐adjusted profit function estimates economies of scale of unit and branch banks; and the effects of bank holding‐company affiliation on the level of bank profits is also examined. The results indicate larger economies of scale for branch banks than for unit banks; and bank holding‐company affiliates were found to be more efficient than independent banks.