An examination of the relative economic efficiency of mutual vs. stock savings institutions

This article employs a nonlinear system of Cobb-Douglas profit and input demand equations to analyze price and technical efficiency in a sample of presumably not-for-profit mutual and presumably profit-maximizing stock savings institutions. Theories of property rights and agency are reviewed to provide predictions of price efficiency (i.e., profit maximization and cost minimization behavior), and technical efficiency. The study makes several contributions to the literature. First, it examines the effect of ownership form on both price and technical efficiency. Second, it separately examines the effect of regulatory form on both price and technical efficiency. The model enables us to analyze the separate effects of ownership and regulatory form across a heterogeneous sample of firms. We also analyze the effects of risk in the form of two separate regulatory variables and the effect of market share on economic efficiency.