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Financial Deregulation and Economies of Scale and Scope: Evidence from the Major Australian Banks

Financial Deregulation and Economies of Scale and Scope: Evidence from the Major Australian Banks In this study a parametric approach employing a flexible translog functional model is used to estimate economies of scale and scope in the four major Australian banks (ANZ, NAB, CBA and WESTPAC). Two hypotheses are tested to determine whether bank economies of scale have changed and also whether economies of scope were exhausted following financial deregulation. The analysis reveals that there is evidence for a continuing difference in banks' economies of scale as a result of deregulation. The empirical evidence also suggests that economies of scope were not exhausted by financial deregulation. In addition, there is continuing evidence of considerable economies of scope in the four major banks. In other words, Australian banks have not fully embraced deregulation and adjusted their joint production in a cost efficient manner. Findings in this study indicate that further deregulation would create a more competitive and efficient banking environment in Australia. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Financial Markets Springer Journals

Financial Deregulation and Economies of Scale and Scope: Evidence from the Major Australian Banks

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Publisher
Springer Journals
Copyright
Copyright © 2001 by Kluwer Academic Publishers
Subject
Finance; Finance, general; Macroeconomics/Monetary Economics//Financial Economics; International Economics; Econometrics; Economic Theory/Quantitative Economics/Mathematical Methods
ISSN
1387-2834
eISSN
1573-6946
DOI
10.1023/A:1016260215809
Publisher site
See Article on Publisher Site

Abstract

In this study a parametric approach employing a flexible translog functional model is used to estimate economies of scale and scope in the four major Australian banks (ANZ, NAB, CBA and WESTPAC). Two hypotheses are tested to determine whether bank economies of scale have changed and also whether economies of scope were exhausted following financial deregulation. The analysis reveals that there is evidence for a continuing difference in banks' economies of scale as a result of deregulation. The empirical evidence also suggests that economies of scope were not exhausted by financial deregulation. In addition, there is continuing evidence of considerable economies of scope in the four major banks. In other words, Australian banks have not fully embraced deregulation and adjusted their joint production in a cost efficient manner. Findings in this study indicate that further deregulation would create a more competitive and efficient banking environment in Australia.

Journal

Asia-Pacific Financial Markets – Springer Journals

Published: Oct 9, 2004

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