Are private banks more efficient than public banks? Evidence from Russia
AbstractWe study whether bank efficiency is related to bank ownership in Russia. We find that foreign banks are more efficient than domestic private banks and – surprisingly – that domestic private banks are not more efficient than domestic public banks. These results are not driven by the choice of production process, the bank’s environment, management’s risk preferences, the bank’s activity mix or size, or the econometric approach. The evidence in fact suggests that domestic public banks are more efficient than domestic private banks and that the efficiency gap between these two ownership types did not narrow after the introduction of deposit insurance in 2004. This may be due to increased switching costs or to the moral hazard effects of deposit insurance. The policy conclusion is that the efficiency of the Russian banking system may benefit more from increased levels of competition and greater access of foreign banks than from bank privatization.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 3/2008.
Length: 48 pages
Date of creation: 21 Apr 2008
Date of revision:
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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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Bank Efficiency; State Ownership; Foreign ownership; Russia;
Other versions of this item:
- A. Karas & K. Schoors & L. Weill, 2008. "Are private banks more efficient than public banks? Evidence from Russia," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 08/519, Ghent University, Faculty of Economics and Business Administration.
- Alexei Karas & Koen Schoors & Laurent Weill, 2008. "Are private banks more efficient than public banks ? Evidence from Russia," Working Papers of LaRGE Research Center 2008-15, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg (France).
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-29 (All new papers)
- NEP-BAN-2008-04-29 (Banking)
- NEP-CIS-2008-04-29 (Confederation of Independent States)
- NEP-EFF-2008-04-29 (Efficiency & Productivity)
- NEP-TRA-2008-04-29 (Transition Economics)
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