A Reestimation of the Benston-Bell-Murphy Cost Functions for a Larger Sample with Greater Size and Geographic Dispersion

Murphy, Neil B.

doi:10.2307/2329957

Cited by 15 publications

(11 citation statements)

References 2 publications

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“…Many studies during the 1970s attempted to extend the previous literature by taking into account technology and other trends in modern banking [for example, Murphy (1972) ;Daniel, Longbrake and Murphy (1973); Kalish and Gilbert (1973); Mullineaux (1975) and Mullineaux (1978)]. From these studies, mainly based on CobbDouglas cost function estimations, there appeared to be a consensus about the existence of economies of scale in banking, although these were not large enough to prevent small and medium-sized banks benefiting from viable competition.…”

Section: Studies On Bank Costs In the Usmentioning

confidence: 99%

Analysing the determinants of bank efficiency: the case of Italian banks

2004

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This study investigates the main determinants of Italian banks' cost efficiency over the period 1993-1996, by employing a Fourier-flexible stochastic cost frontier in order to measure X-efficiencies and economies of scale. Quality and riskiness of bank outputs are explicitly accounted for in the cost function and their impact on cost efficiency levels is evaluated. The results show that mean X-inefficiencies range between 13 and 15 per cent of total costs and they tend to decrease over time for all bank sizes. Economies of scale appear present and significant, being especially high for popular and credit co-operative banks. Moreover, the inclusion of risk and output quality variables in the cost function seems to reduce the significance of the scale economy estimates. Following Spong et al. (1995) a profitability test is undertaken that allows for the identification of banks that are both cost and profit efficient. The results suggest that the most efficient and profitable institutions are more able to control all aspects of costs, especially labour costs. Finally, the data are pooled to carry out a logistic regression model in order to examine bank- and market-specific factors that influence Italian banks' inefficiency. Confirming Mester (1993, 1996), inefficiencies appear to be inversely correlated with capital strength and positively related to the level of non-performing loans in the balance sheet. The analysis also shows that there is no clear relationship between asset size and bank efficiency. Finally, it is possible to infer that quoted banks seem to be on average more efficient than their non-quoted counterparts.

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Section: Studies On Bank Costs In the Usmentioning

confidence: 99%

Analysing the determinants of bank efficiency: the case of Italian banks

2004

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“…While Bell and Murphy [1], [pp. 48–51] and Murphy [9], [p. 2101] find that larger accounts, measured by size of average balance, tend to be more costly to handle, the opposite was found by Taylor [10], [p. 38]. Flannery [7], [p. 103] and Benston [2], [pp.…”

Section: Asset Size Distribution Of Credit Unions In the Sample And Imentioning

confidence: 99%

“…Studies employing the Benston‐Bell‐Murphy approach have found consistent and significant economies of scale in commercial banking [1], [5], [8], [9]. Benston also found significant economies of scale both in the savings and loan industry [2] and in consumer finance companies [3].…”

Section: Introductionmentioning

confidence: 99%

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On Economies of Scale in Credit Unions

Koot

1978

The Journal of Finance

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“…The most reliable studies on production efficiencies in banking (e.g., Murphy, 1972) indicate that economies of scale may exist up to about $100 million in deposits, but are not observable above that level. However, we know of no persuasive argument (apart from the separate issue of management efficiency) that economies will result from affiliation per se .…”

Section: Potential Benefits and Costs Of Bank Holding Companiesmentioning

confidence: 99%