Are private banks more efficient than public banks ? Evidence from Russia

Alexei Karas, Koen Schoors and Laurent Weill

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: We study whether bank ownership is related to bank efficiency 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 the production process, the bank’s environment, the management’s risk preferences, the bank’s activity mix, 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 types of banks is not lower 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 higher access of foreign banks than from bank privatization.

Keywords: Bank Efficiency; State Ownership; Foreign ownership; Russia. (search for similar items in EconPapers)
JEL-codes: G21 P30 P34 P52 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-ban, nep-com, nep-eff and nep-tra
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Citations: View citations in EconPapers (24)

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Working Paper: Are private banks more efficient than public banks? Evidence from Russia (2008)
Working Paper: Are private banks more efficient than public banks? Evidence from Russia (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2008-15

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