Bank Efficiency amid Foreign Entry: Evidence from the Central American Region
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Summary:
This paper investigates the efficiency of domestic and foreign banks in the Central American region during 2002-07. Using two main empirical approaches, Data Envelopment Analysis and Stochastic Frontier Analysis, the paper finds that foreign banks are not necessarily more efficient than their domestic counterparts. If anything, the regional banks that were acquired by global banks in a wave of acquisitions during 2005-07 can keep up with the local institutions. The efficiency of these acquired banks, however, is shown to have dropped during the acquisition year, recovering only slightly thereafter. Finally, it is important to account for the environment in which banks operate, as country-, sector- and firm-specific characteristics are found to have a considerable influence on bank efficiency.
Series:
Working Paper No. 2010/095
Subject:
Banking Commercial banks Foreign banks Productivity Tax expenditures
English
Publication Date:
April 1, 2010
ISBN/ISSN:
9781451982725/1018-5941
Stock No:
WPIEA2010095
Pages:
33
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