EFFICIENCY IN THE SAVINGS AND LOAN INDUSTRY

The stochastic econometric cost frontier approach is modified to investigate efficiency in mutual and stock S & Ls using 1991 data on U.S. S & Ls. This methodology allows both the cost frontier and error structures to differ between S & Ls of these two ownership forms. A likelihood ratio test indicates that the data support this unrestricted model, which implies efficient mutual and stock S & Ls use different production technologies. Various measures of inefficiency show that on average stock S & Ls are less efficient than mutual S & Ls. The second part of the article relates the inefficiency measures to several correlates.