The Comparative Efficiency of "Grupo" and Foreign Controlled Banks in Latin America (original) (raw)

GLOBAL BUSINESS & FINANCE REVIEW, 2005

Abstract

Bank efficiency studies in Latin America document that foreign banks are more efficient than local banks, but they do not isolate the performance ofbanks that are a part ofbusiness groups ("Grupos "). We investigate the efficiency o f Grupos as compared to foreign banks and find that in the more economically free market o f Chile, Grupo banks are more efficient but find no significant difference in the less economically freemarketsofBrazilandMexico. Weattributeourfindingstoagencyissues,whichaffectbothforeignand Grupo banks causing inefficient resource usage in less economically free markets. In more economically free markets, we attribute differences to increased availability ofcapital.

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