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How Do Large Banking Groups Manage the Efficiency of Their Subsidiaries? Evidence from CEE

Václav Hausenblas and Jitka Lesanovska

Working Papers from Czech National Bank

Abstract: We analyse the cost efficiency over the period 2002-2015 of subsidiaries of selected international banking groups (IBGs) that built up significant banking businesses in Central and Eastern Europe (CEE) in the 1990s and 2000s. Using Bayesian stochastic efficiency analysis, we find evidence of superior efficiency management by IBGs of their subsidiaries, particularly in the period following the crisis of 2008-2009. We find that the subsidiaries of IBGs were in general more cost-efficient than their peers in CEE and that the difference further increased in the post-crisis period. While the overall heterogeneity of banks in CEE in terms of efficiency increased and remained at a higher level in the post-crisis period, the IBGs were able to get it close to the pre-crisis level or to reduce it even further. Although we find bank efficiency to be relatively persistent, we also find evidence of beta-convergence for all the analysed IBGs towards the estimated long-term mean, which is expected to be significantly higher than that of the control group for the majority of the IBGs.

Keywords: Banking groups; convergence; efficiency; governance (search for similar items in EconPapers)
JEL-codes: G21 G39 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff and nep-tra
Date: 2018-10
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