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A comparative multiproduct cost study of foreign-owned and domestic-owned US banks


  • Elyas Elyasiani
  • Rasoul Rezvanian


Significant presence of foreign-owned banks (FOBs) in the US banking markets has raised concerns about concentration of economic and financial power in foreign hands and increased risk exposure of the banking system. The proponents counter that international cost synergies, heightened competition, and improved bank performance resulting from the presence of FOBs justify foreign bank expansion. This paper contrasts the production technologies and the cost characteristics of the FOBs and the domestic-owned banks (DOBs) within a cost minimization context. The hypothesis of identical cost structures between the two groups is tested and rejected. Then, overall and product-specific scale and scope economy measures for the FOBs and the DOBs are derived for the 1992-1994 sample period, relative to the ownership-type-specific cost structures, and contrasted in order to shed light on the ownership-type effect on the cost structure of banks. Differences do manifest themselves between the two groups, but they are small in magnitude. No clear and strong patterns emerge between the ownership type and cost structure of the banks in the sample. These results are consistent with those of the relative efficiency of the FOBs and DOBs found in the literature.

Suggested Citation

  • Elyas Elyasiani & Rasoul Rezvanian, 2002. "A comparative multiproduct cost study of foreign-owned and domestic-owned US banks," Applied Financial Economics, Taylor & Francis Journals, vol. 12(4), pages 271-284.
  • Handle: RePEc:taf:apfiec:v:12:y:2002:i:4:p:271-284 DOI: 10.1080/09603100110090136

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    References listed on IDEAS

    1. Cornell, Bradford, 1983. "The Money Supply Announcements Puzzle: Review and Interpretation," American Economic Review, American Economic Association, vol. 73(4), pages 644-657, September.
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    Cited by:

    1. Byeongyong Paul Choi & Elyas Elyasiani, 2011. "Foreign-owned insurer performance in the US property-liability markets," Applied Economics, Taylor & Francis Journals, vol. 43(3), pages 291-306.
    2. Matthews, Kent & Ismail, Mahadzir, 2006. "Efficiency and Productivity Growth of Domestic and Foreign Commercial Banks in Malaysia," Cardiff Economics Working Papers E2006/2, Cardiff University, Cardiff Business School, Economics Section.
    3. Kent Matthews & Zhiguo Xiao & Xu Zhang, 2009. "Rational Cost Inefficiency in Chinese Banks," Working Papers 292009, Hong Kong Institute for Monetary Research.
    4. repec:eee:proeco:v:193:y:2017:i:c:p:465-478 is not listed on IDEAS
    5. Daley, Jenifer & Matthews, Kent, 2009. "Efficiency and Convergence in the Jamaican banking sector 1998-2007," Cardiff Economics Working Papers E2009/30, Cardiff University, Cardiff Business School, Economics Section.
    6. Jenifer Daley & Kent Matthews & Tiantian Zhang, 2013. "Post-crisis cost efficiency of Jamaican banks," Applied Financial Economics, Taylor & Francis Journals, vol. 23(20), pages 1599-1607, October.
    7. Okuda, Hidenobu & Rungsomboon, Suvadee, 2006. "Comparative cost study of foreign and Thai domestic banks in 1990-2002: Its policy implications for a desirable banking industry structure," Journal of Asian Economics, Elsevier, vol. 17(4), pages 714-737, October.
    8. Yamori, Nobuyoshi & Harimaya, Kozo, 2010. "Efficiency in the Japanese trust banking industry: A stochastic distance function approach," MPRA Paper 21381, University Library of Munich, Germany.
    9. Awdeh Ali & El Moussawi Chawki, 2009. "Bank Efficiency and Foreign Ownership in the Lebanese Banking Sector," Review of Middle East Economics and Finance, De Gruyter, vol. 5(2), pages 66-87, September.

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