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Total productivity and cost efficiency dynamics of US merging banks: A non-parametric bootstrapped analysis of the fifth merger wave

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  • Al-Khasawneh, Jamal Ali
  • Essaddam, Naceur
  • Hussain, Tashfeen

Abstract

This paper investigates the productivity characteristics and cost efficiency dynamics of US acquiring banks over the period from 1992 to 2003. The findings show that large merging banks tend to have the same productivity scores compared to their peer banks. Small merging banks, on the other hand, experienced lower productivity than their peers. The source of the acquirers’ productivity seems to be the efficiency change rather than the frontier shift. Cost efficiency results show that small and large merging banks maintained higher cost efficiencies over their peers for the whole period motivated by higher technical efficiency scores, meaning that the large acquirers’ ability to maximize their outputs given fixed inputs is best relative to merging and non-merging banks of different sizes. The principal component analysis of the cost efficiency sub-components indicate that the merging banks principal cost efficiency components are mainly of technical and pure technical efficiencies but after the merger, allocative efficiency increased substantially at the expense of technical and pure technical efficiencies, while the peer banks cost efficiency remained totally dependent on technical and pure technical efficiencies.

Suggested Citation

  • Al-Khasawneh, Jamal Ali & Essaddam, Naceur & Hussain, Tashfeen, 2020. "Total productivity and cost efficiency dynamics of US merging banks: A non-parametric bootstrapped analysis of the fifth merger wave," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 199-211.
    • Handle: RePEc:eee:quaeco:v:78:y:2020:i:c:p:199-211
    DOI: 10.1016/j.qref.2020.02.002
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    More about this item

    Keywords

    Bank mergers; x-Efficiency; Data envelopment analysis;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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