Browsing by Author "Berger, Allen N."

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  • Berger, Allen N.; Hasan, Iftekhar; Zhou, Mingming (2007)
    Bank of Finland Research Discussion Papers 16/2007
    Published in Journal of Banking & Finance, Volume 33, Issue 1, January 2009, Pages 113-130
    China is reforming its banking system, partially privatizing and permitting minority foreign ownership of three of the dominant 'big four' state-owned banks. This paper seeks to help predict the effects of this change by analysing the efficiency of virtually all Chinese banks in the years 1994-2003. Our findings suggest the big four banks are by far the least efficient and foreign banks the most efficient while minority foreign ownership is associated with significantly improved efficiency. We present corroborating robustness checks and offer several credible mechanisms through which minority foreign owners can increase Chinese bank efficiency. These findings suggest that minority foreign ownership of the big four is likely to significantly improve performance. Keywords: China, foreign banks, efficiency, foreign ownership JEL classification numbers: G21, G28, G34, F23
  • Berger, Allen N.; Hasan, Iftekhar; Korhonen, Iikka; Zhou, Mingming (2010)
    BOFIT Discussion Papers 9/2010
    Conventional wisdom in banking argues that diversification tends to reduce bank risk and improve performance, but the recent financial crisis suggests that aggressive diversification strategies may have resulted in increased risk taking and poor performance. This paper addresses this important question by evaluating the empirical relationship between diversification strategies and the risk-return tradeoff in banking. Our data set covers Russian banks during the 1999-2006 period and finds somewhat mixed results. Specifically, we find that banks performance tends to be non-monotonically related to their diversification strategy. The marginal effects of focus indices (inverse measures of diversification) on performance are nonlinearly associated with the level of risk and foreign ownership. A focused strategy is found to be associated with increased profit and decreased risk only up to a certain threshold. Additionally, when foreign ownership is either very high or very low, banks tend to benefit more from being diversified. This analysis provides important strategic and policy implications for bank managers and regulators in Russia as well as in other emerging economies.
  • Berger, Allen N.; Hasan, Iftekhar; Klapper, Leora F. (2004)
    Suomen Pankin keskustelualoitteita 8/2004
    Published in Journal of Financial Services Research, Vol. 25, No. 2-3, 2004: 169-202
    We seek to contribute to both the finance-growth literature and the community banking literature by testing the effects of the relative health of community banks on economic growth and investigating potential transmission mechanisms for these effects using data from 1993- 2000 on 49 nations.Data from both developed and developing nations suggest that larger market shares and higher efficiency rankings for small, private, domestically owned banks are associated with better economic performance, and that the marginal benefits of larger shares are greater when the banks are more efficient.Only mixed support is found for hypothesized transmission mechanisms through improved financing for SMEs or greater overall bank credit flows.The data from developing nations is also consistent with favourable economic effects from foreign-owned banks, but unfavourable effects from state-owned banks. Key words: banks, community banking, SMEs, financial development, economic growth, international JEL classification numbers: G21, G28, G34, F36
  • Berger, Allen N.; Hasan, Iftekhar; Zhou, Mingming (2010)
    BOFIT Discussion Papers 4/2010
    Published in Journal of Banking & Finance, Volume 34, Issue 7, July 2010, Pages 1417–1435.
    This paper investigates the effects of focus versus diversification on bank performance using data on Chinese banks during the 1996-2006 period. We construct a new measure, economies of diversi-fication, and compare the results to those of the more conventional focus indices, which are based on the sum of squares of shares in different products or regions. Diversification is captured in four dimensions: loans, deposits, assets, and geography. We find that all four dimensions of diversifica-tion are associated with reduced profits and higher costs. These results are robust regardless of al-ternative measures of diversification and performance. Furthermore, we observe that banks with foreign ownership (both majority and minority ownership) and banks with conglomerate affiliation are associated with fewer diseconomies of diversification, suggesting that foreign ownership and conglomerate affiliation play an important mitigating role. This analysis may provide important implications for bank managers and regulators in China as well as in other emerging economies. JEL classification: G21; G28; G34 Keywords: Diversification; focus; efficiency; Chinese banking