Minority owned banks and efficiency revisited

Russell Kashian (), Richard McGregory () and Robert Drago ()
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Russell Kashian: University of Wisconsin/Whitewater
Richard McGregory: University of Wisconsin/Whitewater
Robert Drago: Precision Numerics

Journal of Productivity Analysis, 2017, vol. 48, issue 2, No 1, 97-116

Abstract: Abstract U.S. Government support for minority owned banks (MOBs) dates to the late 1960s. Evidence through the early 1990s suggested these banks are relatively inefficient. This study updates that research, using Stochastic Frontier Analysis (SFA) and panel data from 2003 to 2014 on minority owned banks and other banks. It is, as far as we know, the first such study to exclude outliers in SFA estimation, while recovering the outliers for efficiency estimation. Initial results identify a disruption in cost efficiency during 2008, with statistically distinct regimes for 2003–2007 and 2009–2014. Including recovered observations alters the patterns of MOB efficiency in significant ways, and leads us to conclude that current MOB inefficiency is mainly limited to Asian American owned and Multi-racial and minority serving banks. Tests for the effects of government deposits under a U.S. Treasury program suggest these did not adversely effect efficiency among covered MOBs, but may have improved survival rates for those MOBs subsequent to the financial collapse.

Keywords: Minority owned banks; Stochastic frontier analysis; Efficiency (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11123-017-0510-x

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