Foreign and Domestic Bank Performances: An Ideal Decomposition of Industry Dynamics
AbstractThe aggregate performance of the banking industry depends on the underlying microlevel dynamics within that industry. adjustments within banks, reallocations between banks, entries of new banks, and exits of existing banks. This paper develops a generalized ideal dynamic decomposition and applies it to the return on equity of foreign and domestic commercial banks in Korea from 1994 to 2000. The sample corresponds to the Asian financial crisis and the final stages of a long process of deregulation and privatization in the Korean banking industry. The comparison of our findings reveals that the overall performance of Korean banks largely reflects individual bank efficiencies, except immediately after the Asian financial crisis where restructuring played a more important role on average bank performance. Moreover, Korean regional banks started the restructuring process about one year before the Korean nationwide banks. Foreign bank performance, however, largely reflected individual bank efficiencies, even immediately after the Asian financial crisis.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2004-46.
Length: 28 pages
Date of creation: Oct 2004
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commercial banks; profitability; foreign banks and global advantage hypothesis;
Other versions of this item:
- Yongil Jeon & Stephen M. Miller, 2002. "Foreign and Domestic Bank Performances: An Ideal Decomposition of Industry Dynamics," Working papers 2002-24, University of Connecticut, Department of Economics.
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- G2 - Financial Economics - - Financial Institutions and Services
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