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Bank performance and its determinants in Korea

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  • Lee, Jeong Yeon
  • Kim, Doyeon

Abstract

In this study we develop a measure of bank performance based on the Malmquist index approach. This measure supplements existing financial ratios such as ROA and ROE by addressing some of limitations of these ratios. In our empirical investigation building upon the Malmquist index measure as well as the profitability ratios, we never find convincing evidence of economies of scale present in the Korean banking sector. It also appears that a certain type of ownership such as foreign international banks has the potential to significantly improve bank performance while the management control of government or foreign buyout funds has mainly unfavorable effects on bank performance.

Suggested Citation

  • Lee, Jeong Yeon & Kim, Doyeon, 2013. "Bank performance and its determinants in Korea," Japan and the World Economy, Elsevier, vol. 27(C), pages 83-94.
    • Handle: RePEc:eee:japwor:v:27:y:2013:i:c:p:83-94
    DOI: 10.1016/j.japwor.2013.05.001
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    More about this item

    Keywords

    Bank; Profitability; Economies of scale; Ownership structure; Malmquist index;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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