Purpose – The purpose of this paper is to provide the first empirical study of external economies (agglomeration economies) in the banking industry. Design/methodology/approach – The author extends a standard specification of banking costs to control for community and market characteristics....

Purpose – The purpose of this paper is to provide the first empirical study of external economies (agglomeration economies) in the banking industry. Design/methodology/approach – The author extends a standard specification of banking costs to control for community and market characteristics....

This paper studies the profit efficiency of a sample of large U.S. commercial banks and explores how this performance varies with selected measures of bank risk reflecting aspects of credit risk, liquidity risk, and insolvency risk. We use a standard profit function and the stochastic frontier...