We estimate a stochastic frontier model with random inefficiency parameters, which allows us not only to identify the role of bank risk-taking on driving cost and profit inefficiency, but also to recognize heterogeneous effects of risk exposure on banks with different characteristics. We account...

One learns two main lessons from studying the great quantity of banking efficiency literature. These lessons regard the heterogeneity in results and the absence of a comprehensive review aimed at understanding the reasons for this variability. Surprisingly, although this issue is well-known, it...