Foreign and Domestic Bank Performances: An Ideal Decomposition of Industry Dynamics
Yongil Jeon and
Stephen Miller
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Yongil Jeon: Central Michigan University
No 2004-46, Working papers from University of Connecticut, Department of Economics
Abstract:
The aggregate performance of the banking industry depends on the underlying microlevel dynamics within that industry. adjustments within banks, reallocations between banks, entries of new banks, and exits of existing banks. This paper develops a generalized ideal dynamic decomposition and applies it to the return on equity of foreign and domestic commercial banks in Korea from 1994 to 2000. The sample corresponds to the Asian financial crisis and the final stages of a long process of deregulation and privatization in the Korean banking industry. The comparison of our findings reveals that the overall performance of Korean banks largely reflects individual bank efficiencies, except immediately after the Asian financial crisis where restructuring played a more important role on average bank performance. Moreover, Korean regional banks started the restructuring process about one year before the Korean nationwide banks. Foreign bank performance, however, largely reflected individual bank efficiencies, even immediately after the Asian financial crisis.
Keywords: commercial banks; profitability; foreign banks and global advantage hypothesis (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2004-10
New Economics Papers: this item is included in nep-fin and nep-mac
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Working Paper: Foreign and Domestic Bank Performances: An Ideal Decomposition of Industry Dynamics (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2004-46
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