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Does foreign ownership Foster bank performance

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  • Robert Lensink
  • Ilko Naaborg

Abstract

We examine the effect of a rise in foreign ownership on banks' interest revenues and profitability using panel data of banks worldwide. We determine the exact yearly foreign ownership for each bank and construct a continuous foreign ownership variable. Estimating with the system generalized methods of moments (GMM) technique we find that a rise in foreign ownership negatively affects bank performance, providing evidence for the home field advantage theory.
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Suggested Citation

  • Robert Lensink & Ilko Naaborg, 2007. "Does foreign ownership Foster bank performance," ULB Institutional Repository 2013/14287, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/14287
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    References listed on IDEAS

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    1. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    2. Ilko Naaborg & Bert Scholtens & Jakob de Haan & Hanneke Bol & Ralph de Haas, 2004. "How Important are Foreign Banks in the Financial Development of European Transition Countries?," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 3(2), pages 99-123, August.
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    5. Majnoni, Giovanni & Shankar, Rashmi & Varhegyi, Eva, 2003. "The dynamics of foreign bank ownership - evidence from Hungary," Policy Research Working Paper Series 3114, The World Bank.
    6. Allen N. Berger & Robert DeYoung & Hesna Genay & Gregory F. Udell, 1999. "Globalization of financial institutions: evidence from cross-border banking performance," Working Paper Series WP-99-25, Federal Reserve Bank of Chicago.
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    Cited by:

    1. My Tran & Malcolm Abbott, 2020. "The Productivity and Efficiency of Vietnamese Securities Firms, 2009 to 2017," Applied Economics and Finance, Redfame publishing, vol. 7(4), pages 101-111, July.
    2. Nadia Saghi-Zedek, 2016. "Product diversification and bank performance: does ownership structure matter?," Post-Print halshs-01342528, HAL.
    3. Süer, Ömür & Levent, Haluk & Şen, Süleyman, 2016. "Foreign entry and the Turkish banking system in 2000s," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 420-435.
    4. Wu, Meng-Wen & Shen, Chung-Hua & Lu, Chin-Hwa, 2015. "Do more foreign strategic investors and more directors improve the earnings smoothing? The case of China," International Review of Economics & Finance, Elsevier, vol. 36(C), pages 3-16.
    5. Vuslat Us, 2015. "The Turkish Banking Sector Before and After the Global Crisis:An Ownership Breakdown," CBT Research Notes in Economics 1502, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    6. Festić Mejra & Črepinko Polona & Bratina Borut, 2020. "The Importance of Corporate Governance of Banks Concerning the Ownership in the International Environment," Naše gospodarstvo/Our economy, Sciendo, vol. 66(4), pages 11-27, December.
    7. Chung‐Hua Shen & Chin‐Hwa Lu & Meng‐Wen Wu, 2009. "Impact of Foreign Bank Entry on the Performance of Chinese Banks," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(3), pages 102-121, May.
    8. Wanping Yang & Bingyu Zhao & Jinkai Zhao & Zhengda Li, 2019. "An Empirical Study on the Impact of Foreign Strategic Investment on Banking Sustainability in China," Sustainability, MDPI, vol. 11(1), pages 1-15, January.
    9. My Tran & Malcolm Abbott, 2021. "An Empirical Research Survey of the Productivity and Efficiency of the Securities Industry," Applied Economics and Finance, Redfame publishing, vol. 8(2), pages 42-52, March.
    10. Saghi-Zedek, Nadia, 2016. "Product diversification and bank performance: Does ownership structure matter?," Journal of Banking & Finance, Elsevier, vol. 71(C), pages 154-167.
    11. Yongseung Han & Myeong Hwan Kim & Won-Joong Kim, 2012. "Determinants of profit efficiency: evidence from Korean savings banks," Applied Financial Economics, Taylor & Francis Journals, vol. 22(12), pages 1003-1016, June.
    12. Ghulam Mujtaba Kayani & Yasmeen Akhtar & Chen Yiguo & Tahir Yousaf & Syed Jawad Hussain Shahzad, 2021. "The Role of Regulatory Capital and Ownership Structure in Bank Liquidity Creation: Evidence From Emerging Asian Economies," SAGE Open, , vol. 11(2), pages 21582440211, April.
    13. James Laurenceson & Fengming Qin, "undated". "Has minority foreign investment in China�s banks improved their cost efficiency?," EAERG Discussion Paper Series 1305, School of Economics, University of Queensland, Australia.
    14. Anastasia Stepanova & Olga Ivantsova, 2012. "Does Corporate Governance Have an Effect on Performance in the European Banking Sector? Evidence from a Crisis Environment," HSE Working papers WP BRP 10/FE/2012, National Research University Higher School of Economics.

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