Keywords: Banks, efficiency, mergers, financial institutions
Abstract: We assess the effects of geographic expansion on bank efficiency using cost and profit efficiency for over
7,000 U.S. banks, 1993-1998. We find that parent organizations exercise some control over the efficiency
of their affiliates, although this control tends to dissipate with distance to the affiliate. However, on average,
distance-related efficiency effects tend to be modest, suggesting that some efficient organizations can
overcome any effects of distance. The results imply there may be no particular optimal geographic scope for
banking organizations some may operate efficiently within a single region, while others may operate
efficiently on a nationwide or international basis.
Full paper (254 KB PDF)
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Last update: January 12, 2001