X-Efficiency in Banking: Looking beyond the Balance Sheet

Jeffrey A Clark and Thomas Siems

Journal of Money, Credit and Banking, 2002, vol. 34, issue 4, 987-1013

Abstract: The distribution free and stochastic frontier estimation methods are used to derive bank specific measures of cost and profit X-efficiency. This is done to investigate the importance of including aggregate measures of off-balance-sheet (OBS) activities. The results indicate that economic cost and production cost X-efficiency estimates increase with the inclusion of the OBS measure. Profit X-efficiency estimates are largely unaffected. Further, the composition of banks' OBS activities appears to help explain interbank differences in cost and profit X-efficiency estimates, whereas bank size and the mix between on- and off-balance-sheet banking activities are largely uncorrelated with the X-efficiency estimates.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:34:y:2002:i:4:p:987-1013

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