Financial
Institutions
Center
Evidence on the Objectives
of Bank Managers
by
Joseph P. Hughes
Loretta J. Mester
94-15
THE WHARTON FINANCIAL INSTITUTIONS CENTER
The Wharton Financial Institutions Center provides a multi-disciplinary research approach to
the problems and opportunities facing the financial services industry in its search for
competitive excellence. The Center's research focuses on the issues related to managing risk
at the firm level as well as ways to improve productivity and performance.
The Center fosters the development of a community of faculty, visiting scholars and Ph.D.
candidates whose research interests complement and support the mission of the Center. The
Center works closely with industry executives and practitioners to ensure that its research is
informed by the operating realities and competitive demands facing industry participants as
they pursue competitive excellence.
Copies of the working papers summarized here are available from the Center. If you would
like to learn more about the Center or become a member of our research community, please
let us know of your interest.
Anthony M. Santomero
Director
The Working Paper Series is made possible by a generous
grant from the Alfred P. Sloan Foundation
Joseph P. Hughes is at Rutgers University. Loretta J. Mester is at the Federal Reserve Bank of
1
Philadelphia.
This paper is a revision of "Accounting for the Demand for Financial Capital and Risk-Taking in Bank Cost
Functions."
Please address correspondence to Joseph P. Hughes, Department of Economics, Rutgers University, New
Brunswick, NJ 08903, or to Loretta J. Mester, Research Department, Federal Reserve Bank of Philadelphia, Ten
Independence Mall, Philadelphia, PA 19106.
The views expressed here are ours and do not necessarily represent the views of the Federal Reserve Bank of
Philadelphia or the Federal Reserve System.
Evidence on the Objectives of Bank Managers
1
Revised: January 1994
(Original Draft: December 1992)
Abstract: We present evidence on the objective function of