Productive Efficiency Performance of Minority and Nonminority-Owned Banks: A Nonparametric Approach

Abstract

This study examines the efficiency performance of the minority-owned banks (MOBS) as multiproduct firms relative to that of the nonminority banks (NMOBs) using a highly flexible nonparametric approach. Since MOBS and NMOBs employ distinct technologies the efficiency indices for the two groups are derived relative to their respective group-specific frontiers and are contrasted to shed light on the ownership-efficiency relationship. The MOB sample is then disaggregated and the intra-group efficiency differentials are investigated. The findings support the hypothesis that abstracting the regional, regulatory, size, and maturity characteristics of banks, efficiency differentials between MOBS and NIMOBs are statistically insignificant.