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THE EFFECT OF GLOBALIZATION ON EFFICIENCY CHANGE, TECHNOLOGICAL PROGRESS AND THE PRODUCTIVITY GROWTH OF U.S. SMALL AND LARGE BANKS

Seyed M. Mehdian

Mark J. Perry

Rasoul Rezvanian

 

 

ABSTRACT

A non-parametric approach is used to examine the effects of globalization and deregulation on the efficiency and productivity growth of small and large banks in the U.S. between 1990 and 2003. Using a representative sample of commercial banks, the study finds empirical evidence that both small and large banks made significant technological progress and productivity growth between 1990 and 2003. In addition, the statistical evidence shows that large banks are generally more efficient than small banks for most efficiency indices in both years. However, despite globalization, deregulation, and the gains in technology and productivity, there was a decrease in overall efficiency for both large and small banks in 2003 compared to 1990, caused exclusively by allocative inefficiency.

Key Words: Banking, technological change, efficiency, firm performance

JEL Codes: G210, G280, L220