Foreign bank diversification and efficiency prior to and during the financial crisis: Does one business model fit all?

Claudia Curi (), Ana Lozano-Vivas and Valentin Zelenyuk

No BEMPS18, BEMPS - Bozen Economics & Management Paper Series from Faculty of Economics and Management at the Free University of Bozen

Abstract: Diversified and focused business models may affect foreign bank efficiency differently in branches or subsidiaries. We investigate whether there is a unique optimal business model in three dimensions: assets, funding and income. We apply recently developed bootstrap methods to estimate group efficiency separately for diversified and focused banks and to test for differences across groups. We further analyze the link between bank efficiency and bank-specific characteristics including diversification measures. Using Luxembourg bank data that includes the financial crisis, we find there is no unique business model as diversified and focused foreign banks coexist and compete in all three dimensions. The most efficient business model appears to be diversified with regard to assets and focused with respect to funding and income. Over time, we find a shift to more focused assets and funding but not income.

Keywords: foreign banks; asset funding and income diversification; financial crisis; DEA group-efficiency; heterogeneous bootstrap (search for similar items in EconPapers)
JEL-codes: C14 G21 G28 G32 G34 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014-08
New Economics Papers: this item is included in nep-ban and nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Foreign bank diversification and efficiency prior to and during the financial crisis: Does one business model fit all? (2015)
Working Paper: Foreign bank diversification and efficiency prior to and during the financial crisis: Does one business model fit all? (2015)
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