Inherited or Earned? Performance of Foreign Banks in Central and Eastern Europe

Emilia Jurzyk and Olena Havrylchyk

No 2010/004, IMF Working Papers from International Monetary Fund

Abstract: Using a combination of propensity score matching and difference-in-difference techniques we investigate the impact of foreign bank ownership on the performance and market power of acquired banks operating in Central and Eastern Europe. This approach allows us to control for selection bias as larger but less profitable banks were more likely to be acquired by foreign investors. We show that during three years after the takeover, banks have become more profitable due to cost minimization and better risk management. They have additionally gained market share, because they passed their lower cost of funds to borrowers in terms of lower lending rates. Previous studies failed to pick up the improvements in performance of takeover banks, because they did not account for the performance of financial institutions before acquisitions.

Keywords: WP; takeover bank; foreign bank; acquired bank; control bank; greenfield bank; foreign banks; foreign acquisition; propensity score matching; bank capitalization; target bank; bank ownership; domestic bank; Loan loss provisions; Commercial banks; Foreign direct investment; Personal income; Central and Eastern Europe (search for similar items in EconPapers)
Pages: 41
Date: 2010-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=23507 (application/pdf)

Related works:
Journal Article: Inherited or earned? Performance of foreign banks in Central and Eastern Europe (2011)
Working Paper: Inherited or earned? Performance of foreign banks in Central and Eastern Europe (2011)
Working Paper: Inherited or earned? Performance of foreign banks in Central and Eastern Europe (2011)
Working Paper: Inherited or Earned? Performance of Foreign Banks in Central and Eastern Europe (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2010/004

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().