This study addresses the productive efficiency regarding the banking costs, stressing its focus on the Portuguese banking market. This study follows the intermediation option concerning the conceptualization of the banking firm. The financial and operating costs are both considered in the efficiency analysis. The costspecification used is the Fourier functional form because of the multiproduct nature of the banking firm. The sample covers nearly all the Portuguese banks with non-consolidated panel data. The study of inefficiency is elaborated through the stochastic frontier model. The inefficiency rate is estimated on about 4%. Summing up, the yet unfinished concentration process of the Portuguese Banking Industry seems to be justified by the possibility of shrinkage of the X-inefficiency.
banking industry; cost function; X-inefficiency; stochastic cost frontier; panel data analysis
