Is foreign-bank efficiency in financial centers driven by home or host country characteristics?

Claudia Curi (), Paolo Guarda, Ana Lozano-Vivas and Valentin Zelenyuk

Journal of Productivity Analysis, 2013, vol. 40, issue 3, 367-385

Abstract: This paper investigates whether home or host country factors can explain differences in technical efficiency among foreign banks operating in the Luxembourg financial center. We first address heterogeneity across banks by using the group-wise bootstrap to compare DEA measures of bank efficiency between branches and subsidiaries, focused and diversified banks, and euro area and non-euro area banks. We then control for these factors in a second-stage regression indentifying the impact of country-specific regulatory and macroeconomic variables on individual bank efficiency scores. Our regulatory indicators capture the strictness of capital requirements, private monitoring, official disciplinary power and restrictions on bank activities. Our macroeconomic indicators capture GDP per capita in the home country and its position in the business cycle. Our results carry policy implications for bank regulators in both home and host countries and provide insight into banks’ choice between establishing a branch or a subsidiary to develop cross-border activities through international financial centers. Copyright Springer Science+Business Media, LLC 2013

Keywords: Foreign bank efficiency; Home-host country characteristics; Bank regulation; Data envelopment analysis; Bootstrap; G15; G21; G28; C14 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jproda:v:40:y:2013:i:3:p:367-385

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DOI: 10.1007/s11123-012-0294-y

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