The efficiency of financial institutions: A review and preview of research past, present and future (original) (raw)

Abstract

This introductory article reviews past research on the topic of financial institution efficiency, surveys the contributions in this special issue, and suggests how future research on this important topic might proceed.

Key takeaways

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1. X-inefficiencies account for over 20% of banking costs, dominating scale inefficiencies at under 5%.
2. The introductory article reviews past research and suggests future directions for financial institution efficiency studies.
3. Studies indicate that mergers often fail to yield significant efficiency gains, even under favorable conditions.
4. Optimal scope economies redefine production efficiency, incorporating revenue alongside traditional cost measures.
5. Future research should focus on the determinants of efficiency, including agency problems and regulatory impacts.

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