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Bank ownership and efficiency in China: what lies ahead in the world’s largest nation?

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Author Info

  • Berger , Allen N

    ()
    (Federal Reserve Board)

  • Hasan , Iftekhar

    ()
    (Lally School of Management,Rensselaer Polytechnic Institute, and Bank of Finland Research)

  • Zhou, Mingming

Abstract

China is reforming its banking system, partially privatizing and permitting minority foreign ownership of three of the dominant ‘big four’ state-owned banks. This paper seeks to help predict the effects of this change by analysing the efficiency of virtually all Chinese banks in the years 1994–2003. Our findings suggest the big four banks are by far the least efficient and foreign banks the most efficient while minority foreign ownership is associated with significantly improved efficiency. We present corroborating robustness checks and offer several credible mechanisms through which minority foreign owners can increase Chinese bank efficiency. These findings suggest that minority foreign ownership of the big four is likely to significantly improve performance.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0716netti.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 16/2007.

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Length: 47 pages
Date of creation: 10 Oct 2007
Date of revision:
Handle: RePEc:hhs:bofrdp:2007_016

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Keywords: foreign banks; efficiency; foreign ownership;

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References

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