Productivity and efficiency at large and community banks in the US: A Bayesian true random effects stochastic distance frontier analysis

► We compare the productivity and efficiency of large and community banks in the US. ► This is performed within a Bayesian true random effects SFA model. ► The model is capable of disentangling unobserved heterogeneity from inefficiency. ► Failure to allow for unobserved heterogeneity will result in misleading results. ► Large banks have shown higher productivity growth, but lower efficiencies.