Description
This paper estimates profit efficiency using a seemingly unrelated stochastic frontier model where both cost and revenue efficiencies are obtained simultaneously. This method implicitly accounts for and estimates the correlation between revenue and cost efficiencies and allows us to achieve consistent and more efficient estimates. We use a copula-based maximum likelihood method applied to a well specified non-standard profit function to generate the distribution of the composite error. We show the performance of this estimating method using a sample of US commercial banks to study the evolution of profit efficiency for U.S. community banks from 2004 to 2017.Our results show that banks are less efficient in cost, revenues and profit; we find the average in the efficiency of 76.6% in revenues, 75,2% in cost and 53.6% in profits. We obtain a positive and statistically significant correlation between the composite errors of the revenue and cost function, it means that banks, which are more efficient in cost, are efficient in revenues and profits
| Period | 22 Sep 2022 |
|---|---|
| Event title | International Finance Conference |
| Event type | Conference |
| Conference number | XXII |
| Location | Cali, ColombiaShow on map |
| Degree of Recognition | International |