Bank ownership and efficiency in China : what lies ahead in the world's largest nation?

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Title: Bank ownership and efficiency in China : what lies ahead in the world's largest nation?
Author: Berger, Allen N. ; Hasan, Iftekhar ; Zhou, Mingming
Organization: Suomen Pankki
Series: Bank of Finland Research Discussion Papers
Series number: 16/2007
Year of publication: 2007
Publication date: 1.6.2007
Published in: Published in Journal of Banking & Finance, Volume 33, Issue 1, January 2009, Pages 113-130
Pages: 45 s.
Keywords: tehokkuus; Kiina; pankkitoiminta; omistus; ulkomaiset pankit; kansainvälinen; yksityistäminen; valtionpankit; Bofit-kokoelma;
JEL: G21; G28; G34; F23
Abstract: 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

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