Bank efficiency and foreign ownership: Do good institutions matter?

B.W. Lensink, A.J. Meesters, I. Naaborg

Research output: Contribution to journalArticleAcademicpeer-review

206 Citations (Scopus)

Abstract

This paper contributes to the literature on foreign ownership and bank efficiency by examining whether the efficiency of foreign banks depends on the institutional quality of the host country and on institutional differences between the home and host country. Using stochastic frontier analysis for a sample of 2095 commercial banks in 105 countries for the years 1998-2003, we find that foreign ownership negatively affects bank efficiency. However, in countries with good governance this negative effect is less pronounced. We also find that higher quality of the institutions in the home country and higher similarity between home and host country institutional quality reduce foreign bank inefficiency. (C) 2007 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)834-844
Number of pages11
JournalJournal of Banking and Finance
Volume32
Issue number5
DOIs
Publication statusPublished - May-2008

Keywords

  • banks
  • cost efficiency
  • foreign ownership
  • governance
  • FINANCIAL INSTITUTIONS
  • TRANSITION
  • EXPERIENCE
  • ECONOMIES
  • COUNTRIES
  • INDUSTRY
  • COST

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