BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 28/2008:
Do better institutions improve bank efficiency? Evidence from a transitional economy
Iftekhar Hasan ()
, Haizhi Wang ()
and Mingming Zhou
Abstract: 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.
Keywords: institutional development; bank efficiency; Chinese banks; (follow links to similar papers)
JEL-Codes: G21; O43; (follow links to similar papers)
38 pages, December 16, 2008
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