Privatization matters: Bank efficiency in transition countries
AbstractTo investigate the impact of bank privatization in transition countries, we take the largest banks in six relatively advanced countries, namely, Bulgaria, the Czech Republic, Croatia, Hungary, Poland and Romania. Income and balance sheet characteristics are compared across four bank ownership types. Efficiency measures are computed from stochastic frontiers and used in ownership and privatization regressions having dummy variables for bank type. Our empirical results support the hypotheses that foreign-owned banks are most efficient and government-owned banks are least efficient. In addition, the importance of attracting a strategic foreign owner in the privatization process is confirmed. However, counter to the conjecture that foreign banks cream skim, we find that domestic banks have a local advantage in pursuing fee-for-service business. Finally, we show that both the method and the timing of privatization matter to efficiency; specifically, voucher privatization does not lead to increased efficiency and early-privatized banks are more efficient than later-privatized banks even though we find no evidence of a selection effect.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 8/2004.
Length: 39 pages
Date of creation: 10 Jun 2004
Date of revision:
Publication status: Published in Journal of Banking and Finance, 2005, pages 2155-78.
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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Web page: http://www.suomenpankki.fi/bofit_en/
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Other versions of this item:
- Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2005. "Privatization matters: Bank efficiency in transition countries," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2155-2178, August.
- John P. Bonin & Iftekhar Hasan & Paul Wachtel, 2004. "Privatization Matters: Bank Efficiency in Transition Countries," William Davidson Institute Working Papers Series 2004-679, William Davidson Institute at the University of Michigan.
- Paul Wachtel & John Bonin & Iftekhar Hasan, 2004. "Privatization Matters: Bank Efficiency in Transition Countries," Working Papers 04-06, New York University, Leonard N. Stern School of Business, Department of Economics.
- P30 - Economic Systems - - Socialist Institutions and Their Transitions - - - General
- P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
- P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
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