Abstract
The aim of this study is to analyze how banking ownership affects banking efficiency in countries which have recently experienced the European integration process more intensely. Using a Bayesian Stochastic Frontier Approach (SFA) applied to panel data, we have estimated efficiency levels in a sample of 226 banks from 12 countries during the period 2000 to 2008. The results show no significant differences between different types of private ownership, questioning the relevance of ownership as a determinant of banking efficiency in these countries. In addition, we have not found any evidence to suggest that foreign ownership is more efficient than its domestic counterpart. These results contradict the popular belief about the higher efficiency levels associated with foreign ownership.
Highlights
Banking sectors in Eastern and Central European countries have undergone major transformations over the past two decades, firstly, as a consequence of the transition from centrally planned economy to market economy and, secondly, due to the European integration process
The results show no significant differences between different types of private ownership, questioning the relevance of ownership as a determinant of banking efficiency in these countries
As a consequence of this lack of statistical robustness in the results, we can not affirm that domestic banks are more efficient than foreign banks; these results provide enough evidence to doubt the higher levels of banking efficiency we traditionally associate with foreign ownership
Summary
Banking sectors in Eastern and Central European countries have undergone major transformations over the past two decades, firstly, as a consequence of the transition from centrally planned economy to market economy and, secondly, due to the European integration process. These processes led to the establishment of specific regulations for banks and other financial intermediaries which allowed their modernization and rapid changes in their ownership structures. Some studies [1,2,3] have found evidence of clear improvements in the banking performance of transition economies since the adoption of the new regulations and, especially, since the massive entry of foreign ownership. It should be noted that most of the studies cited focus on the transition period (1990s) and the years immediately preceding the 2004 enlargement, while only a few studies have worked with more recent data including the years immediately following their accession
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