Cadet, Raulin Lincifort (2008): Cost and profit efficiency of banks in Haiti: do domestic banks perform better than foreign banks?
Download (135kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Cost and profit efficiency of banks in Haiti: do domestic banks perform better than foreign banks?|
|Keywords:||Cost Efficiency; Profit Efficiency; Foreign Banks; Domestic Banks|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
N - Economic History > N2 - Financial Markets and Institutions > N26 - Latin America ; Caribbean
|Depositing User:||Raulin Cadet|
|Date Deposited:||07. Dec 2008 07:47|
|Last Modified:||16. Feb 2013 03:21|
Aigner, D. J., Lovell, C. A. K. and Schmidt, P. (1977). Formulation and estimation of stochastic frontier production function models, Journal of Econometrics 6: 21–37.
Altunbas, Y., Gardener, E. P. M., Molyneux, P. and Moore, B. (2001). Efficiency in European banking, European Economic Review 45: 1931–1955.
Battese, G. E. and Coelli, T. J. (1995). A model for technical inefficiency effects in a stochastic frontier production for panel data, Empirical Economics 20: 325–332.
Berger, A. N., Hancock, D. and Humphrey, D. B. (1993). Bank efficiency derived from the profit function, Journal of Banking and Finance 17(2-3): 317–347.
Berger, A. N. and Humphrey, D. B. (1992). Measurement and efficiency in banking, in Z. Griliches (ed.), Output Measurement in the Service Sectors, University of Chicago Press, Chicago, pp. 245–279.
Berger, A. N., Leusner, J. H. and Mingo, J. J. (1997). The efficiency of bank branches, Journal of Monetary Economics 40(1): 141–162.
Berger, A. N. and Mester, L. J. (1997). Inside the black box: What explains differences in the efficiencies of financial institutions?, Journal of Banking and Finance 21: 895–947.
Bonin, J. P., Hasan, I. and Wachtel, P. (2005). Bank performance, efficiency and ownership in transition countries, Journal of Banking and Finance 29: 31–53.
Bos, J. W. B. and Kool, C. J. M. (2006). Bank efficiency: the role of bank strategy and local market conditions, Journal of Banking and Finance 30: 1953–1974.
Brownbridge, M. (1998). Financial distress in local banks in Kenya, Nigeria, Uganda and Zambia: causes and implications for regulatory policy, Development Policy Review 16: 173–188.
Carbo, S., Humphrey, D. B. and del Paso, R. L. (2007). Do cross-country differences in bank efficiency support a policy of ”national champions”?, Journal of Banking and Finance 31(7): 2173–2188.
Carvallo, O. and Kasman, A. (2005). Cost efficiency in the latin american and caribbean banking systems, Journal of International Financial Markets Institutions and Money 15: 55–72.
Coelli, T. J. (1995). Estimators and hypothesis tests for a stochastic frontier function: a Monte Carlos analysis, Journal of Productivity Analysis 6(3): 247–268.
DeYoung, R., Hasan, I. and Kirchhoff, B. (1998). The impact of out-of-state on the cost efficiency of local commercial banks, Journal of Economics and Buisiness 50(2): 191–203.
Freedman, P. L. and Click, R. W. (2006). Banks that don’t lend? unlocking credit to spur growth in developing countries, Development Policy Review 24(3): 279–302.
Kodde, D. A. and Palm, F. C. (1986). Wald criteria for jointly testing equality and inequality restrictions, Econometrica 54(5): 1234–1248.
Kumbhakar, S. C., Lozano-Vivas, A., Lovell, C. A. K. and Hasan, I. (2001). The effects of deregulation on the performance of financial institutions: the case of Spanish savings banks, Journal of Money, Credit and Banking 33(1): 101–120.
Meeusen, W. and van den Broeck, J. (1977). Efficiency estimation from Cobb-Douglas production functions with composed error, 18: 435–444.
Mitchell, K. and Onvural, N. M. (1996). Economies of scale and scope at large commercial banks: evidence from the Fourier flexible functional form, Journal of Money, Credit and Banking 28(2): 178–199.
Roa, A. (2005). Cost frontier efficiency and risk-return analysis in an emerging market, International Review of Financial Analysis 14: 283–303.
Sensarma, R. (2006). Are foreign banks always the best? comparison of State-owned, private and foreign banks in india, Economic Modelling 23: 717–735.
Staikouras, C., Mamatzakis, E. and Koutsomanoli-Filippaki, A. (2007). Cost efficiency of the banking industry in the south eastern european region, International Financial Markets, Institutions and Money In press.
Vennet, R. V. (2002). Cost and profit efficiency of financial conglomerates and universal banks in europe, Journal of Money, Credit, and Banking 34(1): 254–282.