Scale and scope economies of Australian permanent building s

The interrelationship between technological change, branching, and the multi-product cost structure of Australian permanent building societies (PBS) is examined within a dynamic specification of the cost function. The analysis finds that the speed of cost adjustment to its long-run levels is quite f...

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Bibliographic Details
Published in:Asia Pacific journal of management 1994-10, Vol.11 (2), p.255
Main Authors: Esho, Neil, Sharpe, Ian G
Format: Article
Language:English
Subjects:
Banking
Banking industry
Banks
Branch banking
Building societies
Cost structure
Costs
Economic models
Economies of scale
Equilibrium
Financial institutions
Interest costs
Pacific Rim studies
Regression analysis
Studies
Technological change
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Summary:The interrelationship between technological change, branching, and the multi-product cost structure of Australian permanent building societies (PBS) is examined within a dynamic specification of the cost function. The analysis finds that the speed of cost adjustment to its long-run levels is quite fast, with 93.5% of the total adjustment occurring in the initial period. The results also show that the data for Australian PBSs strongly reject the use of the generalized Cobb-Douglas cost functional form in favor of the translog cost function. The translog cost function satisfied the usual properties - concavity and monotonicity in input prices - of neoclassical production and cost functions. The analysis sheds light on concerns relating to the viability of PBSs. At both branch and firm level there appears to be potential for smaller societies to benefit from increased scale through mergers. Overall, these results suggest that regulators should support attempts to merge the smaller groups of PBSs.
ISSN:0217-4561
1572-9958