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

41 Pages Posted: 18 Jan 2010

See all articles by Emilia Magdalena Jurzyk

Emilia Magdalena Jurzyk

affiliation not provided to SSRN

Olena Havrylchyk

CEPII, Centre d'Etudes Prospectives et d'Info. Internationales, Paris; Université Paris Ouest - Nanterre, La Défense - EconomiX

Date Written: Janurary 2010

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: Bank restructuring, Banking sector, Central and Eastern Europe, Economic models, Foreign investment, Profits, Risk management

Suggested Citation

Jurzyk, Emilia Magdalena and Havrylchyk, Olena, Inherited or Earned? Performance of Foreign Banks in Central and Eastern Europe (Janurary 2010). IMF Working Papers, Vol. , pp. 1-39, 2010. Available at SSRN: https://ssrn.com/abstract=1537513

Emilia Magdalena Jurzyk (Contact Author)

affiliation not provided to SSRN

No Address Available

Olena Havrylchyk

CEPII, Centre d'Etudes Prospectives et d'Info. Internationales, Paris ( email )

113 rue de Grenelle
Paris, F-75007
France

Université Paris Ouest - Nanterre, La Défense - EconomiX ( email )

200 Avenue de la République
Nanterre cedex, Nanterre Cedex 92000
France

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