On the efficiency of US community banks around the COVID-19 outbreak

Abstract

This paper examines how the COVID-19 pandemic affected the efficiency of 569 publicly traded community banks in the United States. Using a slacks-based measure (SBM) DEA modelling framework, we analyse quarterly data around the pandemic outbreak to estimate overall technical efficiency, pure technical efficiency, and scale efficiency scores. We use four assessment perspectives: general, loan-volume focused, loan-income focused, and income-focused models. Additionally, we incorporate credit risk adjustment in loan and income-focused models. Our findings indicate that U.S. community banks enhanced their efficiency during and after COVID-19, surpassing pre-pandemic levels. Managerial efficiency drove this improvement. Adjusting for default risk weakened efficiency improvements, revealing a more accurate picture of efficiency changes during and after the pandemic.

Rights

This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent.

Cite as

Downloadable citations

Identifiers

DOI

https://doi.org/10.1080/00036846.2024.2413421

Repository URI

https://www.research.ed.ac.uk/en/publications/254d9a7b-aefd-4c06-8f28-e3b3103541a2