US banks efficiency after global financial crisis: transient and persistent decomposition

22 Pages Posted: 12 Jul 2021

See all articles by Giancarlo Ferrara

Giancarlo Ferrara

University of Palermo - Department of Economics, Business and Statistics; SOSE - Soluzioni per il Sistema Economico SpA

Konstantinos Kounetas

Department of Economics, University of Patras

Date Written: July 10, 2021

Abstract

The Global Financial Crisis creates liquidity shocks, banks failures and a global economic downturn while led to significant supervisory and regulatory reforms affecting banks efficiency performance. We offer new insights investigating overall inefficiency and by decomposing into transient and persistent components. Using a panel data on 5698 US banks during the period 2010-2016, this study incorporates the measure of both transient and persistent production and cost inefficiency. We find that persistent efficiency seems to be more important for both specifications, as it accounts for 32\% (for the production) and 39\% (for the cost function) of the inefficiency comparing with the transient part. We argue that most of banks faced increasing returns to scale in production and cost, independently from ownership and size dimension.

Keywords: Production/Cost Function; Financial crisis; US Banks; Efficiency; Transient and Persistent

JEL Classification: C23; D24; G21

Suggested Citation

Ferrara, Giancarlo and Kounetas, Konstantinos, US banks efficiency after global financial crisis: transient and persistent decomposition (July 10, 2021). Available at SSRN: https://ssrn.com/abstract=3884023 or http://dx.doi.org/10.2139/ssrn.3884023

Giancarlo Ferrara (Contact Author)

University of Palermo - Department of Economics, Business and Statistics ( email )

Viale delle Scienze
Palermo, 90100
Italy

SOSE - Soluzioni per il Sistema Economico SpA ( email )

Via Mentore Maggini
Rome, 00143
Italy

Konstantinos Kounetas

Department of Economics, University of Patras ( email )

University Campus, Rio
Patras, 26500
Greece

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