Credit Market Freedom and Cost Efficiency in US state banking

Georgios Chortareas; George Kapetanios; Alexia Ventouri

doi:10.1016/j.jempfin.2016.03.002

Credit Market Freedom and Cost Efficiency in US state banking

Georgios Chortareas, George Kapetanios, Alexia Ventouri

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Abstract

This paper investigates the dynamics between the credit market freedom counterparts of the economic freedom index drawn from the Fraser institute database and bank cost efficiency levels across the U.S. states. We consider a sample of 3,809 commercial banks per year, on average, over the period 1987-2012. After estimating cost efficiency scores using the Data Envelopment Analysis (DEA), we develop a fractional regression model to test the implications of financial freedom for bank efficiency. Our results indicate that banks operating in states that enjoy a higher degree of economic freedom are more cost efficient. Greater independence in financial and banking markets from government controls can result in higher bank efficiency. This effect emerges in addition to the efficiency enhancing effects of interstate banking and intrastate branching deregulation.

Original language	English
Pages (from-to)	173-185
Journal	Journal of Empirical Finance
Volume	37
Issue number	0
Early online date	1 Apr 2016
DOIs	https://doi.org/10.1016/j.jempfin.2016.03.002
Publication status	Published - 1 Jun 2016

Keywords

Economic freedom indices
Credit market freedom
Bank cost efficiency
Data Envelopment Analysis

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jempfin.2016.03.002

Credit market freedom and cost efficiency in US_VENTOURI_Publishedonline1April2016_GREEN AAMAccepted author manuscript, 757 KBLicence: CC BY-NC-ND

Cite this

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AU - Ventouri, Alexia

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Credit Market Freedom and Cost Efficiency in US state banking

Abstract

Keywords

UN SDGs

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