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Are private banks more efficient than public banks? : Evidence from Russia

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  • Karas, Alexei
  • Schoors, Koen
  • Weill, Laurent

Abstract

We study whether bank efficiency is related to bank ownership in Russia. We find that foreign banks are more efficient than domestic private banks and - surprisingly - that domes-tic private banks are not more efficient than domestic public banks. These results are not driven by the choice of production process, the bank's environment, management's risk preferences. the bank's activity mix or size, or the econometric approach. The evidence in fnicl suggests that domestic public banks arc more efficient than domestic private banks and that the efficiency gap between these two ownership types did not narrow after the introduction of deposit insurance in 2004. This may be due to increased switching costs or to the moral hazard effects of deposit insurance. The policy conclusion is that the efficiency of the Russian banking system may benefit more from increased levels of competition and greater access of foreign banks than from bank privatization. JEL classification: G21; P30; P34; P52 Keywords: Bank efficiency; state ownership; foreign ownership; Russia

Suggested Citation

  • Karas, Alexei & Schoors, Koen & Weill, Laurent, 2008. "Are private banks more efficient than public banks? : Evidence from Russia," BOFIT Discussion Papers 3/2008, Bank of Finland, Institute for Economies in Transition.
  • Handle: RePEc:bof:bofitp:2008_003
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    Cited by:

    1. Anatoly Peresetsky, Alexander Karminsky, 2011. "Models for Moody’s Bank Ratings," Frontiers in Finance and Economics, SKEMA Business School, vol. 8(1), pages 88-110, April.
    2. Das, Amarendra, 2012. "Who extracts minerals more efficiently—Public or private firms? A study of Indian mining industry," Journal of Policy Modeling, Elsevier, vol. 34(5), pages 755-766.
    3. Weill, Laurent, 2011. "How corruption affects bank lending in Russia," Economic Systems, Elsevier, vol. 35(2), pages 230-243, June.
    4. Головань С.В. & Назин В.В. & Пересецкий А.А., 2010. "Непараметрические Оценки Эффективности Российских Банков," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 46(3), июль.
    5. Zuzana Fungáčová & Laura Solanko, 2009. "Risk-taking by Russian banks: Do location, ownership and size matter?," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
    6. Jarko Fidrmuc & Philipp J. Süss, 2011. "The Outbreak of the Russian Banking Crisis," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 5(1), pages 046-063, March.
    7. Alexei Karas & William Pyle & Koen Schoors, 2009. "The Effect of Deposit Insurance on Market Discipline:Evidence from a Natural Experiment on Deposit Flows," Middlebury College Working Paper Series 0905, Middlebury College, Department of Economics.
    8. Zuzana Fungáčová & Laura Solanko, 2009. "Risk-taking by Russian banks: Do location, ownership and size matter?," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
    9. Peresetsky, Anatoly, 2010. "Bank cost efficiency in Kazakhstan and Russia," BOFIT Discussion Papers 1/2010, Bank of Finland, Institute for Economies in Transition.
    10. Nazin, Vladimir, 2010. "Nonparametric estimates of technical efficiency of Russian banks and crisis impact," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 20(4), pages 28-52.
    11. Mehrotra, Aaron & Sánchez-Fung, José R., 2011. "Assessing McCallum and Taylor rules in a cross-section of emerging market economies," Journal of International Financial Markets, Institutions and Money, Elsevier, pages 207-228.
    12. Andrianova, Svetlana, 2012. "Public banks and financial stability," Economics Letters, Elsevier, vol. 116(1), pages 86-88.
    13. repec:eee:rujoec:v:1:y:2015:i:1:p:30-54 is not listed on IDEAS

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • P30 - Economic Systems - - Socialist Institutions and Their Transitions - - - General
    • P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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