FIRM EFFICIENCY AND THE REGULATORY CLOSURE OF SAVINGS-AND-LOANS - AN EMPIRICAL-INVESTIGATION

This paper uses a two-step methodology to examine the relationship bet ween firm inefficiency and the regulatory closure of savings and loans (S&Ls). In the first step, using multiproduct, translog stochastic co st frontiers, we estimate inefficiency scores separately for mutual an d stock S & Ls operating in the southwest in 1988. We use the ineffici ency scores in second step logit models to identify determinants of re gulatory closure. For both mutual and stock S & Ls, we find a signific ant positive relationship between firm inefficiency and regulatory clo sure. We also find a greater probability of closure for S & Ls in econ omically depressed states.