Technical Efficiency and the Probability of Bank Failure among Agricultural and Non-Agricultural Banks

This study is designed to analyze bank failures from the technical efficiency standpoint under a stochastic cost frontier framework and evaluate the reliability of the technical efficiency measure as a determinant of the financial health of banks and probability to succeed or fail at the height of the current recessionary period. Results of this analysis confirm that successful agricultural banks have been operating more efficiently than surviving nonagricultural banks. This result helps to refute the contention that farm loans are at a relatively higher level of riskiness.