Efficiency in the Savings and Loan Industry

Loretta Mester

Rodney L. White Center for Financial Research Working Papers from Wharton School Rodney L. White Center for Financial Research

Abstract: I modify the stochastic econometric cost frontier approach to investigate efficiency in mutual and stock S&L using 1991 data on U.S. S&Ls. My methodology allows both the cost frontier and error structures to differ between S&Ls of these two ownership forms. A likelihood ratio test indicates that the data support this unrestricted model, which implies efficient mutual and stock S&Ls use different production technologies. Various measures of inefficiency show that on average stock S&Ls are less efficient than mutual S&Ls. The second part of the article relates the inefficiency measures to several correlates.

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Related works:
Journal Article: Efficiency in the savings and loan industry (1993)
Working Paper: Efficiency in the savings and loan industry (1992)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:pennfi:26-92

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