Journal of Banking and Finance 17 (1993) 221-249. North-Holland The efficiency of financial institutions: A review and preview of research past, present, and future* Allen N. Berger zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Board zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of Governors of the Federal Reserve System, Washington, DC 20551, USA William C. Hunter Federal Reserve Bank of Atlanta, Atlanta, GA 30303, USA Stephen G. Timme Georgia State University, Atlanta, GA 30303, USA This introductory article reviews past research on the topic of financial institution efficiency, surveys the contributions in this special issue, and suggests how future research on this important topic might proceed. 1. Introduction In a world in which the structures of financial service industries are changing rapidly, it is important to determine the cost and revenue efficiency of the evolving financial institutions. If these institutions are becoming more efficient, then we might expect improved profitability, greater amounts of funds intermediated, better prices and service quality for consumers, and greater safety and soundness if some of the efliciency savings are applied Correspondence to: Allen N. Berger, Mail Stop 180, Federal Reserve Board, 20th and C Sts. N.W., Washington, DC 20551, USA. Telephone (202) 452-2903, fax (202) 452-5295, or email mlanbOO(&fed.frb,gov. *The opinions expressed do not necessarily reflect those of the Board of Governors, the Reserve Banks, or their staffs. The authors thank the Federal Reserve Bank of Atlanta and Georgia State University School of Business for sponsoring the conference on which this special issue is based at the Atlanta Reserve Bank, September 2425, 1992. Financial support from the Georgia State University Department of Finance, Research Committee. and Center for Risk Management and Insurance Research is gratefully acknowledged. The authors also thank Paul Bauer, Sallv Davies. Shawna Grosskopf. Diana Hancock. Dave Humnhrev, Pat McAllister. and Doug McManus for helpful comments; and Mandeep Chahal, Janet doher, Peter Dadalt, Sheila Griffin, and Lynn Woosley for administrative help.