Profitability of Foreign Banks in Central and Eastern Europe

30 Pages Posted: 28 Jun 2011

See all articles by Olena Havrylchyk

Olena Havrylchyk

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

Emilia Magdalena Jurzyk

KU Leuven - Centre for Institutions and Economic Performance (LICOS)

Date Written: July 2011

Abstract

This article uses data for 418 banks operating in Central and Eastern Europe between 1993 and 2004 to analyse the impact of the mode of foreign bank entry and of the parent institutions’ characteristics on bank profitability. The results show that foreign banks are affected both less and differently by domestic economic conditions, but do react to the health of the parent banks and the economic situations in their home countries. Their mode of entry is important: profits of banks entering via greenfield investment exhibit a complementary relationship with their parent banks, whereas profits of banks acquiring domestic institutions are negatively related to the opportunity costs in their home markets.

Keywords: G15, G21, F36, Foreign banks, bank profits, multinational banking, transition economies

Suggested Citation

Havrylchyk, Olena and Jurzyk, Emilia Magdalena, Profitability of Foreign Banks in Central and Eastern Europe (July 2011). Economics of Transition, Vol. 19, Issue 3, pp. 443-472, 2011. Available at SSRN: https://ssrn.com/abstract=1873772 or http://dx.doi.org/10.1111/j.1468-0351.2010.00406.x

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

Emilia Magdalena Jurzyk

KU Leuven - Centre for Institutions and Economic Performance (LICOS) ( email )

Waaistraat 6 - box 3511
Leuven, 3000
Belgium

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