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Inherited or earned? Performance of foreign banks in Central and Eastern Europe

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  • Havrylchyk, Olena
  • Jurzyk, Emilia

Abstract

In this study, using a combination of propensity score matching and difference-in-difference techniques, we investigate the impact of foreign bank ownership on the performance and market power of acquired banks operating in Central and Eastern Europe. This approach allows us to control for a selection bias as larger but less profitable banks were more likely to be acquired by foreign investors. We show that during 3Â years after takeover, banks become more profitable owing to cost minimization and better risk management. They also gained market share due to passing their lower cost of funds to borrowers in terms of lower lending rates. Previous studies failed to note the improvements in the performance of takeover banks because they did not account for the selection bias.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 35 (2011)
Issue (Month): 5 (May)
Pages: 1291-1302

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Handle: RePEc:eee:jbfina:v:35:y:2011:i:5:p:1291-1302

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Keywords: Foreign banks Foreign acquisition Propensity score matching;

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References

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Citations

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Cited by:
  1. Efthyvoulou, Georgios & Yildirim, Canan, 2014. "Market power in CEE banking sectors and the impact of the global financial crisis," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 11-27.
  2. Martin Brown & Ralph De Haas, 2012. "Foreign banks and foreign currency lending in emerging Europe," Economic Policy, CEPR & CES & MSH, vol. 27(69), pages 57-98, 01.
  3. Jackowicz, Krzysztof & Kowalewski, Oskar & Kozłowski, Łukasz, 2013. "The influence of political factors on commercial banks in Central European countries," Journal of Financial Stability, Elsevier, vol. 9(4), pages 759-777.
  4. repec:diw:diwfin:diwfin05010 is not listed on IDEAS
  5. 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.
  6. Ralph De Haas & Yevgeniya Korniyenko & Elena Loukoianova & Alexander Pivovarsky, 2012. "Foreign banks and the Vienna Initiative: turning sinners into saints," Working Papers 143, European Bank for Reconstruction and Development, Office of the Chief Economist.
  7. Brown, M. & Haas, R. de, 2010. "Foreign Currency Lending in Emerging Europe: Bank Level Evidence," Discussion Paper 2010-135, Tilburg University, Center for Economic Research.
  8. Böninghausen, Benjamin & Köhler, Matthias, 2012. "Diversification and determinants of international credit portfolios: Evidence from German banks," Discussion Papers 28/2012, Deutsche Bundesbank, Research Centre.
  9. 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.
  10. Ralph De Haas & Yevgeniya Korniyenko & Alexander Pivovarsky & Elena Loukoianova, 2012. "Foreign Banks and the Vienna Initiative," IMF Working Papers 12/117, International Monetary Fund.
  11. Anders Aslund, 2011. "Lessons from the East European Financial Crisis, 2008-10," Policy Briefs PB11-9, Peterson Institute for International Economics.

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