I would like to thank Erik Berglöf for his helpful comments which considerably improved the paper. I also thank two anonymous referees. Finally special thanks are due to the seminar participants of the First Meeting of the Czech Economic Society in Prague (November 2000).
Banking efficiency in transition economies
The role of foreign ownership*
Article first published online: 22 SEP 2003
Economics of Transition
Volume 11, Issue 3, pages 569–592, September 2003
How to Cite
Weill, L. (2003), Banking efficiency in transition economies. Economics of Transition, 11: 569–592. doi: 10.1111/1468-0351.00155
- Issue published online: 22 SEP 2003
- Article first published online: 22 SEP 2003
- Transition economies;
An increasing share of the banking sector is controlled by foreign capital in the majority of transition countries. To analyse the effects of this trend on the performance of the banking sector in these countries, this study conducts a comparative analysis of the performance of foreign-owned and domestic-owned banks operating in the Czech Republic and Poland. We use the stochastic frontier approach to compute cost efficiency scores. Following Mester (1996), financial capital is included in the cost frontier model to control for risk preferences. Our finding is that on average foreign-owned banks are more efficient than domestic-owned banks. We conclude, however, that this advantage does not result from differences in the scale of operations or the structure of activities.