Does the Entry Mode of Foreign Banks Matter for Bank ... - EconomiX

Thus, we have had to track the evolution in the ownership of each bank over time throughseveral sources, including banks’ official publications and Zephyr (Bureau Van Dijk) 13 .This enabled us to differentiate between foreign and domestic banks, and, among foreignbanks, between greenfield investments and merger and acquisition entries.Table 3 displays summary statistics of the sample. We observe clear differencesbetween the categories of banks. In terms of size, the mean M&A bank is approximatelysix times bigger than a greenfield bank and two times bigger than a domestic bank. Interms of the structure of activities, the volumes of investment assets hold by M&As anddomestic banks are much higher than that of greenfield banks. In fact, the former tend toinvest massively on government securities with higher returns and lower risk, rather thanmake loans in a context of difficulties in identifying high-quality new clients, of thenascent stage of institutional infrastructure supporting property and creditors’ rights, andinformation asymmetries. As an example, in Poland, government securities comprisedover 25% of Bank Slaski’s total assets at the end of 1995 (Abarbanell & Bonin, 1997, p.53). This feature is also confirmed by Havrylchyk (2006, p. 10). M&As and domesticbanks also possess much higher volumes of loans than Greenfields. Therefore, thedifference in the relative ratio of investment assets over loans becomes much narrower.6. ResultsWe report our results by first comparing foreign banks against domestic banks tosee if our results are in line with the existing empirical evidence. We then turn our focusto the comparative efficiency of Greenfields versus M&As, and of M&As versusdomestic banks. The parameter estimates from the translog cost functions 14 bythemselves have little informational value; they are simply means to the end of producinga frontier with which to estimate bank-specific cost efficiency scores. Of more interestare the coefficient estimates from the inefficiency models, which show the impact of theparticular variables on bank cost inefficiency.6.1 Foreign Banks versus Domestic Banks13 We are grateful to R.d. Haas and I.v. Lelyveld from de Nederlandsche Bank for kindly sharing data onbank ownership for the years 1994 to 2001.14 Results are available from the authors upon request.-26-