Abstract
THIS THESIS STUDIED commercial bank cost functions in both unitand branch-bank settings using cross-sectional data. The samples included 745 member commercial banks in the Tenth (Kansas City) Federal Reserve District, where unit banking is predominant, and 413 member commercial banks in -the Fifth (Richmond) Federal Reserve District where branch banking is widespread. Earnings and expense data were obtained from individual bank Income and Dividend Reports for 1961, and asset data came from 1961 Reports of Condition for individual banks. The present work differs most notably from earlier bank cost studies in its definition of bank output. Conceptual shortcomings of the measures of output used or suggested in earlier studies-total assets, earning assets, total deposits, and current operating revenue-suggested the need, and provided guidelines, for a new approach to bank output definition. The new measure initially divides output into two components: lending and all other. Lending output was defined as the yield-weighted sum of the diverse earning assets in each bank's portfolio. Yield-weights were obtained by experimenting with linear least-squares regression equations of *the following general form:
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