Research Discussion Papers, Bank of Finland
No 16/2007:
Bank ownership and efficiency in China: what lies ahead in the world’s largest nation?
Allen N Berger ()
, Iftekhar Hasan ()
and Mingming Zhou
Abstract: China is reforming its banking system, partially
privatizing and permitting minority foreign ownership of three of the
dominant ‘big four’ state-owned banks. This paper seeks to help predict the
effects of this change by analysing the efficiency of virtually all Chinese
banks in the years 1994–2003. Our findings suggest the big four banks are
by far the least efficient and foreign banks the most efficient while
minority foreign ownership is associated with significantly improved
efficiency. We present corroborating robustness checks and offer several
credible mechanisms through which minority foreign owners can increase
Chinese bank efficiency. These findings suggest that minority foreign
ownership of the big four is likely to significantly improve
performance.
Keywords: foreign banks; efficiency; foreign ownership; (follow links to similar papers)
JEL-Codes: F23; G21; G28; G34; (follow links to similar papers)
47 pages, October 10, 2007
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