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Foreign bank entry, bank efficiency and market power in Central and Eastern European Countries

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  • Tigran Poghosyan
  • Arsen Poghosyan

Abstract

This article analyses the implications of the recently observed sharp expansion of foreign banks in the Central and Eastern European Countries (CEECs) as measured by equity ownership. We show that the mode of foreign entry has a pivotal impact on the post-entry performance of banks in CEECs. Foreign greenfield banks are characterized by superior cost efficiency, compared with domestic and foreign-acquired banks. The efficiency of foreign-acquired banks deteriorates in the initial year of acquisition, but improves thereafter. Banks acquired by foreigners have less market power relative to domestic and foreign greenfield banks. Overall, the CEEC banking sectors have benefited from the increased foreign bank participation, both in terms of higher efficiency and more competition. Copyright (c) 2010 The Authors. Journal compilation (c) 2010 The European Bank for Reconstruction and Development.

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Bibliographic Info

Article provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.

Volume (Year): 18 (2010)
Issue (Month): 3 (07)
Pages: 571-598

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Handle: RePEc:bla:etrans:v:18:y:2010:i:3:p:571-598

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Cited by:
  1. Georgios Efthyvoulou & Canan Yildirim, 2013. "Market Power in CEE Banking Sectors and the Impact of the Global Financial Crisis," CASE Network Studies and Analyses 0452, CASE-Center for Social and Economic Research.
  2. George Anayiotos & Hovhannes Toroyan & Athanasios Vamvakidis, 2010. "The efficiency of emerging Europe’s banking sector before and after the recent economic crisis," Financial Theory and Practice, Institute of Public Finance, vol. 34(3), pages 247-267.
  3. Tigran Poghosyan & Subal Kumbhakar, 2010. "Heterogeneity of technological regimes and banking efficiency in former socialist economies," Journal of Productivity Analysis, Springer, vol. 33(1), pages 19-31, February.
  4. Mamatzakis, E & kalyvas, a, 2013. "Regulations, Economic Freedom and Bank Performance: Evidence from the EU-10 Economies," MPRA Paper 51878, University Library of Munich, Germany.
  5. Muzaffarjon Ahunov & Leo Van Hove & Marc Jegers, 2013. "Selection and hidden bias in cross-border bank acquisitions: Ukraine’s takeover wave," Working Papers 162, European Bank for Reconstruction and Development, Office of the Chief Economist.
  6. Poghosyan, Tigran, 2010. "Re-examining the impact of foreign bank participation on interest margins in emerging markets," Emerging Markets Review, Elsevier, vol. 11(4), pages 390-403, December.
  7. Fang, Yiwei & Hasan, Iftekhar & Marton, Katherin & Waisman, Maya, 2014. "Bank valuation in new EU member countries," Economic Systems, Elsevier, vol. 38(1), pages 55-72.

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