BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 8/2004:
Privatization matters: Bank efficiency in transition countries
John P. Bonin ()
, Iftekhar Hasan ()
and Paul Wachtel ()
Abstract: To investigate the impact of bank privatization in
transition countries, we take the largest banks in six relatively advanced
countries, namely, Bulgaria, the Czech Republic, Croatia, Hungary, Poland
and Romania. Income and balance sheet characteristics are compared across
four bank ownership types. Efficiency measures are computed from stochastic
frontiers and used in ownership and privatization regressions having dummy
variables for bank type. Our empirical results support the hypotheses that
foreign-owned banks are most efficient and government-owned banks are least
efficient. In addition, the importance of attracting a strategic foreign
owner in the privatization process is confirmed. However, counter to the
conjecture that foreign banks cream skim, we find that domestic banks have
a local advantage in pursuing fee-for-service business. Finally, we show
that both the method and the timing of privatization matter to efficiency;
specifically, voucher privatization does not lead to increased efficiency
and early-privatized banks are more efficient than later-privatized banks
even though we find no evidence of a selection effect.
JEL-Codes: P30; P34; P52; (follow links to similar papers)
39 pages, June 10, 2004
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- This paper is published as:
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Bonin, John P., Iftekhar Hasan and Paul Wachtel, (2005), 'Privatization matters: Bank efficiency in transition countries', Journal of Banking and Finance, Vol. 29, pages 2155-78
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