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Cost and profit efficiency of banks in Haiti: do domestic banks perform better than foreign banks?

Cadet, Raulin Lincifort (2008): Cost and profit efficiency of banks in Haiti: do domestic banks perform better than foreign banks?

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Abstract

I use the stochastic frontier methodology to estimate a cost and a profit frontier functions. The Fourier-flexible form is used in this paper because of its flexibility. Results show that, although foreign banks are more cost efficient than domestic banks, domestic banks are more profit efficient than foreign banks, in Haiti. The paper reveals also that, although treasury bills constitute an alternative source of profit for banks in Haiti, a growth of interest rate on treasury bills increases profit efficiency in current period whereas it decreases profit efficiency one period after this growth. The main implication of this paper is that foreign banks are not always more efficient than domestic banks in developing countries, and even in a country with low income level.

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