Keywords: Bank, financial institution, efficiency, regulation, profit, cost
Abstract: We propose a set of consistency conditions that frontier efficiency
measures should meet to be most useful for regulatory analysis or
other purposes. The efficiency estimates should be consistent in
their efficiency levels, rankings, and identification of best and
worst firms; consistent over time and with competitive conditions in
the market; and consistent with standard nonfrontier measures of
performance. We provide evidence on these conditions by evaluating
and comparing efficiency estimates on U.S. bank efficiency from
variants of all four of the major approaches--DEA, SFA, TFA, and
DFA--and find mixed results.
Full paper (2580 KB PDF)
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