Characteristics determining the efficiency of foreign banks in Australia

Jan Egbert Sturm, Barry Williams

Research output: Contribution to journalArticleResearchpeer-review

38 Citations (Scopus)

Abstract

The factors determining foreign bank efficiency are investigated using a three stage research method. It is found that host market incumbency reduces efficiency of foreign banks in Australia, resulting in over use of inputs. Factors underlying the limited global advantage hypothesis of Berger et al. [Berger, Allen N., DeYoung, Robert, Genay, Hesna, Udell, Gregory F., 2000. Globalisation of financial institutions: Evidence from cross-border banking performance. Brookings-Wharton Papers on Financial Service 3, 23-120] are identified, in that nationality specific factors represented by dummy variables are not significant once other relevant effects are controlled for. Parent profitability is not found to result in increased host nation efficiency, while parent credit rating effects are mixed. Some evidence is presented that banks from more financially sophisticated nations are more efficient. The implications of these results are explored from the perspectives of bank management and bank regulators.

Original languageEnglish
Pages (from-to)2346-2360
Number of pages15
JournalJournal of Banking and Finance
Volume32
Issue number11
DOIs
Publication statusPublished - Nov 2008

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Foreign banks
Factors
Financial institutions
Financial services
Incumbency
Dummy variables
Profitability
Specific factors
Bank management
Banking
Globalization
Bank efficiency
Cross-border
Nationality
Credit rating
Research methods

Cite this

Sturm, Jan Egbert ; Williams, Barry. / Characteristics determining the efficiency of foreign banks in Australia. In: Journal of Banking and Finance. 2008 ; Vol. 32, No. 11. pp. 2346-2360.
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Characteristics determining the efficiency of foreign banks in Australia. / Sturm, Jan Egbert; Williams, Barry.

In: Journal of Banking and Finance, Vol. 32, No. 11, 11.2008, p. 2346-2360.

Research output: Contribution to journalArticleResearchpeer-review

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