Internal and external analysis of community banks' performance

Wei Wang, Jun Huang, Haibo Wang and Bahram Alidaee

International Review of Financial Analysis, 2022, vol. 84, issue C

Abstract: This study explores the efficiency of US community banks and factors that affect it. We present a slacks-based measure model for data envelopment analysis to analyze the efficiency of 3171 community banks in the US, and then conduct a panel data analysis to investigate the factors that affect banks' efficiency. The results show that bank size, community size, and unemployment rate of the region where the community bank is located are positively related to the efficiency, whereas relative affluence of a community has a negative relationship with the community bank efficiency. In addition, community banks providing real estate loans or diversifying their loan services perform better than those concentrating on agricultural loans, which account for a large proportion of the loans provided by US community banks whose traditional role is to provide banking services to rural communities and act as major credit providers for agricultural producers.

Keywords: Data envelopment analysis; Community banks; Slacks-based measure; Panel model; Operational efficiency (search for similar items in EconPapers)
JEL-codes: C33 C67 E60 J10 M20 O10 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:84:y:2022:i:c:s1057521922003593

DOI: 10.1016/j.irfa.2022.102409

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