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Article
What determines differences in foreign bank efficiency? Australian evidence
Globalisation and Development Centre
  • Jan-Egbert Sturm
  • Barry Williams, Bond University
Date of this Version
6-1-2007
Document Type
Journal Article
Publication Details
2006 HERDC submission

Sturm, J. and Williams, B. (2007) What determines difference in foreign bank efficiency? Australian evidence

Working Paper Series; No. 5, Jun. 2007.

Copyright © Jan-Egbert Sturm, Barry Williams and The Globalisation and Development Centre, Bond University, 2007.

Abstract

This study examines the factors that determine difference in efficiency of foreign bank in the host market (Australia). The impact of home market, host market and parent bank characteristics are considered within the frameworks offered by comparative advantage and new trade theories. Parametric distance functions are used to estimate the efficiency of foreign banks in Australia, and the robustness of model specification is tested using both general to specific modelling and extreme bounds analysis. It is found that following clients reduces the efficiency of profit creation. Incumbent bank's market share acts as a barrier to entry, while parent bank profits do not improve host nation efficiency. The limited global advantage hypothesis was found to be relevant for banks from the United Kingdom, while banks from the United States were generally less efficient.

Citation Information
Jan-Egbert Sturm and Barry Williams. "What determines differences in foreign bank efficiency? Australian evidence" (2007)
Available at: http://works.bepress.com/barry_williams/4/