Russian Banking: The Impact of Ownership on Efficiency and Performance
28 Pages Posted: 6 Feb 2012
Date Written: August 1, 2010
This paper analyses the development of the Russian banking sector over the period 2001-2007 to assess the impact of ownership on the operations of commercial banks. The stochastic frontier approach is employed for a sample of the 50 largest Russian banks to determine cost efficiency differences between foreign-owned, domestic private and state-owned banks. We find that cost efficiency of the Russian banking market decreased over the observed period if technical change is taken into account. The estimation results further suggest that foreign banks are more efficient than state-owned banks, and state-owned banks achieve higher efficiency levels than private domestic banks. These results are consistent with the development of the market share of private domestic banks after the crisis. Finally the lower efficiency of the private segment of the Russian banking sector seems to be due to the higher interest rates, which private banks have to pay for their deposits.
Keywords: Bank Efficiency, State Ownership, Foreign ownership, Russia
JEL Classification: G21, P30, P34
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