This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Profitability of Foreign and Domestic Banks in Central and Eastern Europe : Does the Mode of Entry Matter?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Olena Havrylchyk
Emilia Jurzyk

Additional information is available for the following registered author(s):

Abstract

Using data for 265 banks in Central and Eastern European Countries for the period of 1995-2003, this paper analyses the differences in profitability between domestic and foreign banks. We show that foreign banks, especially greenfield institutions, earn higher profits than domestic banks. However, this effect is acquired, rather than inherited, since there is evidence that foreign banks tend to take over less profitable institutions. Profits of foreign banks in the CEEC also exceed profits of their parent banks, explaining the reasons for their entry. Further, we study benefits and costs of foreign ownership by analyzing determinants of profitability for domestic, takeover, and greenfield banks. Profits of foreign banks are less affected by macroeconomic conditions in their host countries. However, greenfield banks are sensitive to the situation at their parent banks. Only domestic banks enjoy higher profits in more concentrated banking markets, whereas takeover bans suffer from diseconomies of scale due to the fact that they acquired large institutions.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepii.fr/anglaisgraph/workpap/summaries/2005/wp05-21.htm
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by CEPII research center in its series Working Papers with number 2005-21.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:cii:cepidt:2005-21

Contact details of provider:
Postal: 9 rue Georges Pitard, 75740 Paris Cedex 15
Phone: 33 01 53 68 55 00
Fax: 33 01 53 68 55 01
Web page: http://www.cepii.fr
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords: Banking system competition FDI financial markets transition economies

Other versions of this item:

Find related papers by JEL classification:
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Williams, Barry, 2003. "Domestic and international determinants of bank profits: Foreign banks in Australia," Journal of Banking & Finance, Elsevier, vol. 27(6), pages 1185-1210, June. [Downloadable!] (restricted)
  2. Ralph de Haas & Ilko Naaborg, 2005. "Internal Capital Markets in Multinational Banks: Implications for European Transition Countries," DNB Working Papers 051, Netherlands Central Bank, Research Department. [Downloadable!]
  3. Claessens, Stijn & Laeven, Luc, 2004. "What Drives Bank Competition? Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 563-83, June.
    Other versions:
  4. Majnoni, Giovanni & Shankar, Rashmi & Varhegyi, Eva, 2003. "The dynamics of foreign bank ownership - evidence from Hungary," Policy Research Working Paper Series 3114, The World Bank. [Downloadable!]
  5. Martinez Peria, Maria Soledad & Mody, Ashoka, 2004. "How Foreign Participation and Market Concentration Impact Bank Spreads: Evidence from Latin America," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 511-37, June.
    Other versions:
  6. Berger, Allen N, et al, 2004. "Bank Concentration and Competition: An Evolution in the Making," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 433-51, June.
  7. Gilbert, R Alton, 1984. "Bank Market Structure and Competition: A Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 617-44, November. [Downloadable!] (restricted)
  8. Peek, Joe & Rosengren, Eric S. & Kasirye, Faith, 1999. "The poor performance of foreign bank subsidiaries: Were the problems acquired or created?," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 579-604, February. [Downloadable!] (restricted)
    Other versions:
  9. Peek, Joe & Rosengren, Eric S, 1997. "The International Transmission of Financial Shocks: The Case of Japan," American Economic Review, American Economic Association, vol. 87(4), pages 495-505, September. [Downloadable!] (restricted)
    Other versions:
  10. Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "Determinants of commercial bank interest margins and profitability : some international evidence," Policy Research Working Paper Series 1900, The World Bank. [Downloadable!]
    Other versions:
  11. Berger, Allen N. & Clarke, George R.G. & Cull, Robert & Klapper, Leora & Udell, Gregory F., 2005. "Corporate governance and bank performance: A joint analysis of the static, selection, and dynamic effects of domestic, foreign, and state ownership," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2179-2221, August. [Downloadable!] (restricted)
    Other versions:
  12. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May. [Downloadable!] (restricted)
  13. Williams, Barry, 1998. "Factors affecting the performance of foreign-owned banks in Australia: A cross-sectional study," Journal of Banking & Finance, Elsevier, vol. 22(2), pages 197-219, February. [Downloadable!] (restricted)
  14. Allen Berger & Timothy Hannan, 1994. "The Efficiency Cost of Market Power in the Banking Industry: A Test of the 'Quiet Life' and Related Hypotheses," Center for Financial Institutions Working Papers 94-29, Wharton School Center for Financial Institutions, University of Pennsylvania.
    Other versions:
  15. Serge Jeanneau & Marian Micu, 2002. "Determinants of international bank lending to emerging market countries," BIS Working Papers 112, Bank for International Settlements. [Downloadable!]
  16. DeYoung, Robert & Nolle, Daniel E, 1996. "Foreign-Owned Banks in the United States: Earning Market Share or Buying It?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 622-36, November. [Downloadable!] (restricted)
  17. Williams, Barry, 1998. "A pooled study of the profits and size of foreign banks in Australia," Journal of Multinational Financial Management, Elsevier, vol. 8(2-3), pages 211-231, September. [Downloadable!] (restricted)
  18. Kyriaki Kosmidou & Fotios Pasiouras & Jordan Floropoulos, 2004. "Linking profits to asset-liability management of domestic and foreign banks in the UK," Applied Financial Economics, Taylor and Francis Journals, vol. 14(18), pages 1319-1324, December. [Downloadable!] (restricted)
  19. Joe Peek & Eric S. Rosengren, 2000. "Collateral Damage: Effects of the Japanese Bank Crisis on Real Activity in the United States," American Economic Review, American Economic Association, vol. 90(1), pages 30-45, March. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? Authors can create their own profile with links to their works on the RePEc Author Service.

This page was last updated on 2008-12-17.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.