For nearly two decades banks in the United States have consolidated in record numbers—in terms of both frequency and the size of the merging institutions. Rhoades (1996) hypothesizes that the main motivations were increased potential for geographic expansion created by changes in state laws...

We investigate the effects of technological change, deregulation, and dynamic changes in competition on the performance of U.S. banks. Our most striking result is that during 1991-1997, cost productivity worsened while profit productivity improved substantially, particularly for banks engaging...

Over the past several years, substantial research effort has gone into measuring the efficiency of financial institutions. Many studies have found that inefficiencies are quite large, on the order of 20% or more of total banking industry costs and about half of the industry's potential profits....

We argue for a shift in the focus of modeling production from the traditional assumptions of profit maximization and cost minimization to a more general assumption of managerial utility maximization that can incorporate risk incentives into the analysis of production and recover value-maximizing...

We investigate the sources of recent changes in the performance of U.S. banks using concepts and techniques borrowed from the cross-section efficiency literature. Our most striking result is that during 1991-1997, cost productivity worsened while profit productivity improved substantially,...

The authors suggest that risk plays an important role in managerial production decisions. Managers make implicit and explicit decisions related to risk, return, and cost in setting target market, product, pricing and delivery decisions. Standard models of production and cost do not explicitly...

During several episodes of declining or rising interest rate changes in the 1980s and 1990s, credit card rates changed little. At the same time, credit cards consistently earned higher returns than most other bank products. Ausenbel (1991) argues the reason is that the industry deviates from a...

This paper explores how to incorporate banks' capital structure and risk-taking into models of production. In doing so, the paper bridges the gulf between (1) the banking literature that studies moral hazard effects of bank regulation without considering the underlying microeconomics of...

Our paper explores the optimal financial contract for a large investor with potential control over a firm's investment decisions. We show that an optimally designed menu of claims for a large investor will include features resembling a U.S. version of lender liability doctrine, equitable...