NONTRADITIONAL ACTIVITIES AND THE EFFICIENCY OF US COMMERCIAL-BANKS

In recent years, an increasing portion of bank income has been generat ed through nontraditional activities. Most studies of bank efficiency do not include any measure of nontraditional activities when measuring outputs. In this paper, cost, revenue, and profit efficiency are esti mated by using models with and without nontraditional output. The resu lts suggest that the standard model which omits nontraditional output understates bank efficiency. Evidence also surfaces that based on effi ciency, the relative ranking of individual banks changes when nontradi tional activities are included as a type of output. (C) 1998 Elsevier Science B,V. All rights reserved.