Productivity growth in large US commercial banks: The initial post-deregulation experience

Abstract

We explore productivity growth for a group of 201 large US commercial banks over the initial post-deregulation period from 1984 to 1990, using data envelopment analysis (DEA). We measure productivity growth using Malmquist productivity indexes and isolate the contributions of technical change, technical efficiency change, and scale change to productivity growth. We find overall productivity growth at the rate of about 4.5% per year on average, but productivity declined by 7.61% between 1984 and 1985 and by 0.33% between 1988 and 1989. Our second-stage panel regressions reveal that larger asset size and specialization of product mix associate with higher productivity growth while higher equity to assets associates with lower productivity growth.