The Efficiency of Bank Branches

Posted: 15 Sep 1999

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business

John Leusner

University of Chicago

John J. Mingo

Mingo & Co.

Date Written: August 1994

Abstract

This study measures the efficiency of the branching network of a large U.S. commercial bank over 1989-1991. We find that branches are on average about half of cost-efficient level, so that there are about twice as many branches as would minimize costs. This 'overbranching' raises operating costs by about 14%, which may be partially or fully offset by additional bank-wide revenues from providing extra customer convenience. X-inefficiencies are larger, about 20% to 25% of operating costs. These findings may help explain some efficiency results commonly found in bank-level analysis, and also have implications regarding bank mergers, market values of branches, and management of branching networks.

JEL Classification: G21, G28, L11, L40, L89, C33

Suggested Citation

Berger, Allen N. and Leusner, John and Mingo, John J., The Efficiency of Bank Branches (August 1994 ). Available at SSRN: https://ssrn.com/abstract=5955

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1014 Greene St.
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

John Leusner

University of Chicago

1101 East 58th Street
Chicago, IL 60637
United States

John J. Mingo

Mingo & Co. ( email )

P.O. Box 764
Livingston, MT 59047-0764
United States
406-222-0907 (Phone)
406-222-8093 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
3,447
PlumX Metrics