Do better institutions improve bank efficiency? : evidence from a transitional economy

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Title: Do better institutions improve bank efficiency? : evidence from a transitional economy
Author: Hasan, Iftekhar ; Wang, Haizhi ; Zhou, Mingming
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 28/2008
Year of publication: 2008
Publication date: 28.12.2008
Published in: Published in Managerial Finance, Vol. 35 Issue: 2, 2009, pp.107-127
Pages: 36 s.
Keywords: instituutiot; vaikutukset; tehokkuus; pankkitoiminta; siirtymätaloudet; Kiina; Bofit-kokoelma
JEL: G21; O43
Abstract: The pace of transition in China over the last two decades has led to great variation across the country in terms of institutional and financial development. In this paper, using a panel of Chinese provinces during the period 1993-2006, we empirically investigate the determinants of the efficiency of the banking sector from an institutional perspective. The most important institutional developments in China are the emergence and gradual dominance of the market economy, financial deepening, the growth of a private sector, the establishment of secure property rights, and rule of law. We find that institutional variables play an important role in affecting banking efficiencies, and that banks tend to operate more efficiently in those regions with a greater private sector presence and more property rights awareness, while the role of financial deepening and rule of law is less straightforward. JEL classifications: G21, O43 Keywords: Institutional development, Bank efficiency, Chinese banks

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