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Bank efficiency and foreign ownership: do good institutions matter?

  • Robert Lensink
  • Aljar Meesters
  • Ilko Naaborg

This paper contributes to the literature on foreign ownership and bank efficiency by examining whether the efficiency of foreign banks depends on the institutional quality of the host country and on institutional differences between the home and host country. Using stochastic frontier analysis for a sample of 2095 commercial banks in 105 countries for the years 1998-2003, we find that foreign ownership negatively affects bank efficiency. However, in countries with good governance this negative effect is less pronounced. We also find that higher quality of the institutions in the home country and higher similarity between home and host country institutional quality reduce foreign bank inefficiency.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/14283.

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Date of creation: 2008
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Publication status: Published in: Journal of Banking & Finance (2008) v.32 n° 5,p.834-844
Handle: RePEc:ulb:ulbeco:2013/14283
Contact details of provider: Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles
Web page: http://difusion.ulb.ac.be

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