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N° 2008-16 |
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| September 2008 |
| Inherited or Earned? Performance of Foreign Banks in Central and Eastern Europe |
Olena Havrylchyk
Emilia Jurzyk |
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| Using a combination of propensity score matching and difference-in-difference techniques
we investigate the impact of foreign bank ownership on the performance and market power of
acquired banks operating in Central and Eastern Europe. This approach allows us to control
for selection bias as larger but less profitable banks were more likely to be acquired by foreign
investors. We show that during three years after the takeover, banks have become more
profitable due to cost minimization and better risk management. They have additionally
gained market share, because they passed their lower cost of funds to borrowers in terms of
lower lending rates. Previous studies failed to pick up the improvements in performance of
takeover banks, because they did not account for the performance of financial institutions
before acquisitions. |
Non-technical summary |
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Résumé
non-technique
en français |
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| Full text |
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| Foreign banks; foreign acquisition; propensity score matching |
Keywords |
| G15, G21, G34, F36 |
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