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A Reestimation of the Benston-Bell-Murphy Cost Functions for a Larger Sample with Greater Size and Geographic Dispersion

Published online by Cambridge University Press:  19 October 2009

Neil B. Murphy
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Extract

In this paper, the models utilized in earlier studies were applied to a larger sample with greater size and geographic dispersion. For those functions that account for the largest proportions of direct operating cost and employment, the scale coefficients increased from 1965 to 1968 so that they were not significantly different from unity. For activities requiring more skilled human resources than the “factory” operations of the typical bank, there were significant economies of scale of magnitudes similar to those in the 1965 Northeast sample. A test of overall scale economies assuming proportional expansion of all facilities showed a decrease in scale economies since 1965.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 7 , Issue 5 , December 1972 , pp. 2097 - 2105
Copyright
Copyright © School of Business Administration, University of Washington 1972

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References

[1]Bell, F.W., and Murphy, N.B.. Costs in Commercial Banking: A Quantitative Analysis of Bank Behavior and Its Relation to Bank Regulation. Federal Reserve Bank of Boston, 1968.Google Scholar
[2]Benston, G.J. “Economics of Scale and Marginal Costs in Banking Operations.” National Banking Review, vol. 2 (June 1965), pp. 507–549.Google Scholar
[3]Murphy, N.B. “A Cross-Section Analysis of the Cost of Operations of Trust Departments.” Journal of Money, Credit, and Banking, vol. 1 (February 1969).CrossRefGoogle Scholar
[4]Murphy, N.B. “A Statistical Approach to Determine the Weights to be Assigned Activity Items in the Demand Deposit Function.” Journal of Bank Research, Fall 1971.Google Scholar