Multinational Banks and Efficiency: What Makes a Difference? An Australian Study

40 Pages Posted: 20 Aug 2007

See all articles by Jan-Egbert Sturm

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich; CESifo (Center for Economic Studies and Ifo Institute)

Barry Williams

Department of Banking and Finance; Financial Research Network (FIRN)

Date Written: August 20, 2007

Abstract

This study examines the factors that determine difference in efficiency of foreign bank in the host market (Australia). The impact of home market, host market and parent bank characteristics are considered within the frameworks offered by comparative advantage and new trade theories. Parametric distance functions are used to estimate the efficiency of foreign banks in Australia, and the robustness of model specification is tested using both general to specific modelling and extreme bounds analysis. It is found that following clients reduces the efficiency of profit creation. Incumbent bank's market share acts as a barrier to entry, while parent bank profits do not improve host nation efficiency. The limited global advantage hypothesis was found to be relevant for banks from the United Kingdom, while banks from the United States were generally less efficient.

Keywords: Foreign bank efficiency, distance functions, extreme bounds analysis, barriers to entry, following clients

JEL Classification: G15, G21, C15, C52

Suggested Citation

Sturm, Jan-Egbert and Williams, Barry, Multinational Banks and Efficiency: What Makes a Difference? An Australian Study (August 20, 2007). 20th Australasian Finance & Banking Conference 2007 Paper. Available at SSRN: https://ssrn.com/abstract=1008199 or http://dx.doi.org/10.2139/ssrn.1008199

Jan-Egbert Sturm (Contact Author)

KOF Swiss Economic Institute, ETH Zurich ( email )

Zurich
Switzerland

HOME PAGE: http://www.kof.ethz.ch

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, 81679
Germany

HOME PAGE: http://www.cesifo.de

Barry Williams

Department of Banking and Finance ( email )

Building H
Caulfield East, Victoria 3145
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Register to save articles to
your library

Register

Paper statistics

Downloads
180
Abstract Views
999
rank
166,093
PlumX Metrics