What Determines Differences in Foreign Bank Efficiency? Australian Evidence

Jan-Egbert Sturm and Barry Williams

No 1587, CESifo Working Paper Series from CESifo

Abstract: This study applies parametric distance functions to estimate the efficiency of foreign banks in Australia, and subsequently employs extreme bounds analysis to establish the determinants of foreign bank efficiency that are robust to model specification. The limited global advantage hypothesis of Berger et al (2000) is supported. Following clients is found to reduce the efficiency of the profit-creation process. The market share of the incumbent banks acts as a barrier to entry to efficiency in the retail market, with acquisition of a domestic bank reducing this effect. Internet-based bank product delivery reduces the efficiency of profit creation in the initial phases of operation, and parent profits do not improve efficiency in the host market.

Keywords: foreign bank efficiency; distance functions; extreme bounds analysis; barriers to entry; following clients (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-com, nep-eff, nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Journal Article: What determines differences in foreign bank efficiency? Australian evidence (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1587

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