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Do better institutions improve bank efficiency? : evidence from a transitional economy

Listed author(s):
  • Hasan, Iftekhar
  • Wang, Haizhi
  • Zhou, Mingming

The pace of transition in China over the last two decades has led to great variation across the country in terms of institutional and financial development. In this paper, using a panel of Chinese provinces during the period 1993-2006, we empirically investigate the determinants of the efficiency of the banking sector from an institutional perspective. The most important institutional developments in China are the emergence and gradual dominance of the market economy, financial deepening, the growth of a private sector, the establishment of secure property rights, and rule of law. We find that institutional variables play an important role in affecting banking efficiencies, and that banks tend to operate more efficiently in those regions with a greater private sector presence and more property rights awareness, while the role of financial deepening and rule of law is less straightforward. JEL classifications: G21, O43 Keywords: Institutional development, Bank efficiency, Chinese banks

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File URL: https://helda.helsinki.fi/bof/bitstream/123456789/8310/1/160647.pdf
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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 28/2008.

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Date of creation: 28 Dec 2008
Publication status: Published in Published in Managerial Finance, Vol. 35 Issue: 2, 2009, pp.107-127
Handle: RePEc:bof:bofitp:2008_028
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Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland

Phone: + 358 9 183 2268
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Web page: http://www.bofit.fi/en/
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