Production costs for consolidated multibank holding companies compared to one-bank organizational forms

Economies of scale and scope for consolidated multibank holding companies (MBHCs) are examined with a translog cost function and are compared with one-bank holding companies (OBHCs) and independent banks. Empirical results indicate that costs curves are generally U-shaped for independent banks and OBHCs but are relatively flat for MBHCs. This evidence implies that banking organizations should prefer the MBHC to one-bank forms at higher output levels. Implications for bank regulatory policy and interstate banking are discussed.