Domestic and Foreign Banks’ Profitability:Differences and Their Determinants
The purpose of this study to analyze and compare the profitability of domestic (Public & Private) and foreign banks operating in the Pakistan Banking market between 2004 and 2010 on quarterly basis. Total 36 Commercial Banks of Pakistani Industry have represented our sample. To control for the effect of bank ownership on performance, we split the sample into three categories: (1) domestic banks with Government Control, (2) domestic banks with Private control, and (3) foreign banks. This study also finds that foreign banks are more profitable than all domestic banks regardless of their ownership structure by applying regression analysis. This may suggest that it is better for a multinational bank to establish a subsidiary/branch rather than acquiring an “existing player” in the host country. We also found that domestic and foreign banks have different profitability determinants, i.e. factors that are important in shaping domestic banks’ profitability are not necessary important for the foreign banks and vice versa. Empirical results show that foreign banks are less affected by the macroeconomic factors of the host country than domestic banks and they have a higher profitability margin in Pakistan.
Volume (Year): 2 (2012)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.econjournals.com|
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.:
- Grosse, Robert & Goldberg, Lawrence G., 1991. "Foreign bank activity in the United States: An analysis by country of origin," Journal of Banking & Finance, Elsevier, vol. 15(6), pages 1093-1112, December.
- 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.
- Joe Peek & Eric S. Rosengren & Faith Kasirye, 1998. "The poor performance of foreign bank subsidiaries: were the problems acquired or created?," Working Papers 98-3, Federal Reserve Bank of Boston.
- Janek Uiboupin, 2004. "Effects Of Foreign Banks Entry On Bank Performance In The Cee Countries," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 33, Faculty of Economics and Business Administration, University of Tartu (Estonia).
- Hultman, Charles W. & Randolph McGee, L., 1989. "Factors affecting the foreign banking presence in the U.S," Journal of Banking & Finance, Elsevier, vol. 13(3), pages 383-396, July.
- Goddard, John & Molyneux, Phil & Wilson, John O S, 2004. "Dynamics of Growth and Profitability in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 1069-90, December.
When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2012-01-5. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilhan Ozturk)
If references are entirely missing, you can add them using this form.