BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 3/2008:
Are private banks more efficient than public banks? Evidence from Russia
Alexei Karas ()
, Koen Schoors ()
and Laurent Weill ()
Abstract: We study whether bank efficiency is related to bank
ownership in Russia. We find that foreign banks are more efficient than
domestic private banks and – surprisingly – that domestic private banks are
not more efficient than domestic public banks. These results are not driven
by the choice of production process, the bank’s environment, management’s
risk preferences, the bank’s activity mix or size, or the econometric
approach. The evidence in fact suggests that domestic public banks are more
efficient than domestic private banks and that the efficiency gap between
these two ownership types did not narrow after the introduction of deposit
insurance in 2004. This may be due to increased switching costs or to the
moral hazard effects of deposit insurance. The policy conclusion is that
the efficiency of the Russian banking system may benefit more from
increased levels of competition and greater access of foreign banks than
from bank privatization.
Keywords: Bank Efficiency; State Ownership; Foreign ownership; Russia; (follow links to similar papers)
JEL-Codes: G21; P30; P34; P52; (follow links to similar papers)
48 pages, April 21, 2008
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