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

investment in Czech, Hungary, and Poland, do it to follow and support its multinationalclients in the first place. Then, as the host countries’ economic and legal environmentsimprove, they also look for new business opportunities. Their primary areas of activitiesare servicing multinational companies and big local corporates, and financinginternational trade thanks to their superior banking know-how. For the specific case ofHungary, according to (Majnoni et al., 2003), the better performance of Greenfield banksmay also be due to the introduction of new financial products.Our findings on the superior cost performance of Greenfields also lends somesupport to the theoretical literature on international M&As, which suggests thatsystematic differences in affiliate performance can emerge between entry modes(Bertrand, Hakkala, & Norbäck, 2007).6.3 M&As versus Domestic BanksIn this section, we present regression results on the sub-sample of of M&As anddomestic banks. These results are shown in table 6 (1) and (2).The same reasoning applies as in the case of Greenfields versus M&As. We firstinclude only the mode of entry dummy, i.e. merger in the modeling of the inefficiencyterm (specification (1)). The result shows a negative although not significant coefficienton merger, which might be an indication that M&A banks are more efficient thandomestic banks.In a next step, we include variables that reflect size, structure of activities, marketshare, and the age effect in the modeling of the inefficiency term (specification (2)).Again, we obtain a coefficient on merger that is negative and insignificant. We thereforeconclude that no cost efficiency difference is apparent between these two types of banks.This result corroborates the one obtained by (Havrylchyk & Jurzyk, 2006) on a sample ofeleven transition economies. It is also in line with (Correa, 2008) which finds that theperformance of M&As is not significantly different from control country-indices.The size variable still suggests that bigger banks tend to be more cost efficient.The market share variable is significant and suggests that higher market share tends tolead to higher cost inefficiency. This result is therefore in contrast with (Grigorian &Manole, 2002) which found that banks with more market share were more efficient.-30-