A balanced panel data set covering 519 U.S. agricultural banks is constructed for the period 1996S2005. Cost efficiency measures of agricultural banks obtained from stochastic frontier analysis and data envelopment analysis are regressed on various bank specific characteristics to explain the cost efficiency differences of agricultural banks. The results indicate that (a) cost efficiencies are positively related to profitability while negatively related with the raw cost inefficiency measure, (b) older agricultural banks tend to be more efficient, (c) regulation may deteriorate efficiency levels, (d) bigger agricultural banks tend to be less efficient, (e) bank-specific characteristics can explain DEA efficiency scores better than they can SFA efficiency measures, and (f) the inconsistency issue related to two-step approaches is not serious.
Agricultural bank, Data envelopment analysis, Efficiency, Efficiency differences, Stochastic frontier analysis
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