Ownership, diversification and cost advantages: Evidence from the Italian leasing industry

Using Greene's (2005) random parameter cost frontier model and a unique hand-collected dataset, this paper provides novel evidence on the cost advantages of Italian leasing companies over 2002-2008, focusing on ownership structures and diversification strategies. Results suggest that cost efficiency and economies of scale have decreased significantly over the period analyzed. Bank-related, independent and domestic leasing companies are more able to control costs than their captive and foreign counterparts. Diversification strategies can be crucial in determining the cost effectiveness of leasing firms. Nonetheless, smaller, independent and less diversified leasing firms appear to benefit from higher economies of scale and greater technological advancements.