The Relative Cost Efficiency of Stock Versus Mutual Thrifts: A Bayesian Approach

40 Pages Posted: 30 Nov 2003 Last revised: 18 Nov 2007

See all articles by James M. Sfiridis

James M. Sfiridis

University of Connecticut - Department of Finance

Kenneth N. Daniels

Daniels Foundation for Impact Investments and Development

Abstract

The relative cost efficiency of the mutual versus stock forms of ownership for thrifts has been a relevant issue in an era of deregulation and competition in the financial services industry. In this study Bayesian-based Markov chain Monte Carlo (MCMC) re-sampling methods are used to solve a stochastic cost frontier model and effectively determine cost efficiencies for the stock and mutual thrift groups. We find a statistically significant difference between both the cost frontiers and cost efficiencies of the two groups, with the stock group operating at the lower-cost point. Agency problems explain a significant portion of the cost efficiency difference. Capital structure differences, though not helping to explain differences in cost efficiency, do help to explain differences in cost structure and managerial attitudes toward risk.

Keywords: thrifts, cost efficiency, stochastic cost frontier, Gibbs sampler, data augmentation

JEL Classification: G21, C11, C15

Suggested Citation

Sfiridis, James M. and Daniels, Kenneth N., The Relative Cost Efficiency of Stock Versus Mutual Thrifts: A Bayesian Approach. Financial Review, Vol. 39, pp. 153-178, 2004, Available at SSRN: https://ssrn.com/abstract=472966

James M. Sfiridis

University of Connecticut - Department of Finance ( email )

Unit 1041F
School of Business
Storrs, CT 06269-1041
United States
860-486-3040 (Phone)
860-486-0349 (Fax)

Kenneth N. Daniels (Contact Author)

Daniels Foundation for Impact Investments and Development ( email )

New Jersey, NJ 07018
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
51
Abstract Views
820
rank
515,042
PlumX Metrics