Efficiency in Banking: Theory, Practice, and Evidence

Joseph Hughes and Loretta Mester

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: Great strides have been made in the theory of bank technology in terms of explaining banks’ comparative advantage in producing informationally intensive assets and financial services and in diversifying or offsetting a variety of risks. Great strides have also been made in explaining sub-par managerial performance in terms of agency theory and in applying these theories to analyze the particular environment of banking. In recent years, the empirical modeling of bank technology and the measurement of bank performance have begun to incorporate these theoretical developments and yield interesting insights that reflect the unique nature and role of banking in modern economies. This chapter gives an overview of two general empirical approaches to measuring bank performance and discusses some of the applications of these approaches found in the literature.

Keywords: bank; efficiency; cost; X-efficiency; risk; profit; agency costs (search for similar items in EconPapers)
JEL-codes: G21 G32 G34 L25 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-01-24
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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Working Paper: Efficiency in banking: theory, practice, and evidence (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:200801

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